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By  the  Same  Author. 


The  Financial  History  of  the  United  States 
from  1789  to  1860.  $3.50. 


IN  PREPARATION. 

Tne  Financial  History  of  tne  United  States 
from  1860  to  the  Close  of  the  Refunding 
Operations  in  1881. 


THE 


FINANCIAL  HISTORY 


UNITED  STATES, 


FROM  1774  TO  1789 


lEmbracmg  tfjc  $eriao  of  tfje  American  Sfooalutfon. 


BY 


ALBERT  S.  BOLLES, 

PROFESSOR  OP  MERCANTILE  LAW  AND  PRACTICE  IN  THE  WHARTON 
SCHOOL  OP  FINANCE  AND  ECONOMY,  UNIVERSITY  OF 
PENNSYLVANIA,  AND  EDITOR  OF  "  THE 
BANKERS'  MAGAZINE." 


SECOND  EDITION. 


NEW  YORK: 
D.  APPLETON  AND  COMPANY, 

1,  3,  and  5  Bond  Street. 
1884. 


Copyright  by 
D.  APPLETON  AND  COMPANY, 
1879. 


Copyright  by 
ALBERT  S.  BOLLES, 
1884. 


J 


KLECTROTYPED  AND  PRINTED 
BY  RAND,  AVERY,  AND  COMPANY, 
BOSTON. 


TO 

WILLIAM   P.  ST.  JOHN, 

PRESIDENT  OF  THE  MERCANTILE  NATIONAL  BANK  OF 
NEW  YORK, 

(Efjfe  fEtJttton  fs  Eetu'catrti 

AS  A  MARK  OF  THE  AUTHOR'S  SINCERE 
FRIENDSHIP. 


PEEFAOE. 


The  changes  in  the  second  edition  are  mostly  in  style.  A 
few  facts  have  been  added,  derived  from  further  investigation 
of  the  documents  in  the  Bureau  of  Rolls  and  Library,  Depart- 
ment of  State,  Washington. 

The  concluding  volume,  covering  the  period  from  the  out- 
break of  the  civil  war  in  1860  to  the  close  of  the  refunding 
operations  in  1881,  the  author  hopes  to  complete  next  year. 

Philadelphia,  August,  1884. 

vii 


PREFACE  TO  THE  FIRST  EDITION. 


The  present  work  has  been  written  with  the  belief  that  it 
would  serve  a  useful  purpose.  The  early  period  of  the  finan- 
cial history  of  the  United  States  is  treated  only  in  the  slightest 
manner  by  Dr.  Von  Hock  in  his  "Die  Finanzen  und  die 
Finanzgeschichte  der  Vereinigten  Staaten  von  Amerika  ; ' '  while 
the  brief  efforts  of  Breck,  Schuckers,  Bronson,  and  occasion- 
ally a  magazine-writer,  are  but  little  more  than  passing  glimpses 
of  a  great  theme.  Even  Phillips,  in  his  work  upon  Conti- 
nental Paper  Money,  which  is  valuable  in  many  respects,  looks 
at  the  subject  from  an  antiquarian  point  of  view,  rather  than 
as  a  student  of  finance. 

It  is  the  intention  of  the  author  to  trace  the  narrative,  in 
another  volume,  from  1789,  when  the  Federal  Constitution  was 
adopted,  to  the  outbreak  of  the  Civil  War  in  1860,  and,  in  a 
final  one,  from  the  latter  period  to  the  resumption  of  specie 
payments.  Each  volume,  therefore,  will  cover  a  clearly-defined 
historical  period,  though,  of  course,  every  period  of  history  is 
necessarily  linked  to  what  has  gone  before  as  well  as  to  the 
time  succeeding. 

To  write  merely  an  abstract  of  the  financial  legislation 
passed  during  the  period  included  within  this  volume,  inter- 
spersed with  comments,  would  have  been  an  easy  but  not  a 
satisfactory  task.  To  possess  any  interest  or  value,  a  finan- 
cial history  must  trace  the  causes  and  consequences  of  the 

ix 


X 


PREFACE  TO  THE  FIRST  EDITION. 


legislation  described.    To  do  this,  however,  was  difficult,  as 

the  materials  too  frequently  were  very  scanty  and  of  poor 
quality.  The  author  has  sought  to  obtain  information  from 
ever}'  source  relating  to  the  subject  within  his  knowledge  ;  and 
if,  in  some  cases,  the  reader  shall  find  the  causes  and  conse- 
quences of  financial  experiments  not  as  fully  set  forth  as  he 
desires,  let  him  first  consider  whether  an}'  thing  more  could  be 
found  relating  to  them,  before  finding  fault  with  the  author. 

The  idea  of  unity  of  proportion  has  been  kept  in  mind  in 
the  preparation  of  the  work,  which  will  explain  why  a  few 
chapters,  especially  the  one  upon  the  Legal  Tender  Laws  of  the 
Revolution,  were  not  extended  beyond  their  present  limits. 

To  Mr.  C.  A.  Cutter,  Librarian  of  the  Boston  Athenaeum, 
the  author  feels  deeply  grateful  for  the  exceedingly  liberal  use 
of  books  belonging  to  that  association.  This,  he  realizes,  is  a 
feeble  acknowledgment  to  make  for  such  valuable  assistance : 
doubtless  a  far  greater  satisfaction  may  be  derived  from  know- 
ing, that,  if  the  work  possesses  any  value,  its  readers  are 
indebted  to  him  for  putting  the  author  within  convenient  reach 
of  much  of  the  material  found  within  these  pages.  To  Mr. 
Robbins  Little,  Superintendent  of  the  Astor  Library,  and  to 
Mr.  Frederick  Saunders,  Librarian  of  the  same,  the  author 
would  also  express  his  heartiest  thanks  for  the  generous  use 
of  the  books  of  that  noble  institution.  Nor  would  he  forget  to 
acknowledge  favors  of  a  similar  character  on  the  part  of  the 
officers  of  the  New- York  Historical  Library. 


CONTENTS. 


BOOK  FIRST. 

FROM  SEPTEMBER,  1774,  TO  THE  FINANCIAL  ADMINISTRA- 
TION OF  ROBERT  MORRIS. 

Page 

CHAPTER  L 

Congress  and  the  Colonies  .      ...      .      .      .      .  3 

CHAPTER  II. 

Organization  of  the  Treasury  Department.      ...  9 
CHAPTER  IIL 

The  First  Issue  of  Continental  Money  24 

CHAPTER  IY. 

Operations  of  the  Board  of  Treasury,  1775-1777 ...  42 
CHAPTER  V. 

Administration  of  the  Board  of  Treasury,  1778  ...  55 
CHAPTER  VI. 

Administration  of  the  Board  of  Treasury,  1779  ...  71 
CHAPTER  VII. 

Administration  of  the  Board  of  Treasury,  1780  ...  90 


CHAPTER  VIII. 
Administration  of  the  Board  of  Treasury,  1781 


.  105 

xi 


xii 


CONTENTS. 


Page 

CHAPTER  IX. 

How  Papee  Monet  was  received   117 

CHAPTER  X. 

State  versus  Continental  Issues   147 

CHAPTER  XI. 

Counterfeiting   150 

CHAPTER  XII. 

Limitation  of  Prices   158 

CHAPTER  XIII. 
The  Legal  Tender  Laws  of  the  Revolution      .      .  .174 

CHAPTER  XIV. 
Taxation  190 

CHAPTER  XV. 

Pledges  and  Arguments   206 

CHAPTER  XVI. 

Speculation,  Corruption,  and  Repudiation    .     .     .  .210 

CHAPTER  XVII. 
Foreign  Loans  221 

CHAPTER  XVHI. 
Loan-Office  Certificates  259 


BOOK  SECOND. 

FROM  MORRIS'S  FINANCIAL  ADMINISTRATION  TO  THE  CLOSE 
OF  THE  CONFEDERATION 

CHAPTER  I. 

The  Financial  Administration  of  Robert  Morris      .      .  267 
CHAPTER  II. 

Administration  of  the  New  Board  of  Treasury  .     .  .333 


BOOK  I. 

FROM  SEPTEMBER,  1774,  TO  THE  FINANCIAL  ADMINISTRATION 
OF  ROBERT  MORRIS. 


1775.] 


CONGRESS  AND  THE  COLONIES. 


7 


when  waging  her  ever-memorable  war  with  Spain.  It 
will  be  seen  that  Congress  had  no  clearly-defined  powers ; 
the  members,  with  only  two  or  three  exceptions,  were 
confined  to  a  narrow  sphere  of  legislation ;  and  until  the 
adoption  of  the  Confederation,  in  March,  1781,  the  States 
regarded  themselves  as  masters  of  the  situation,  and  never 
hesitated  to  instruct  their  delegates  whenever  the  occa- 
sion seemed  to  require  a  fresh  exercise  of  state  tutelage 
or  discipline.  With  the  unfolding  of  unexpected  events, 
Congress  did  indeed  exercise  a  larger  measure  of  power 
than  had  been  granted  to  any  of  the  members ;  yet  they 
always  moved  with  great  circumspection,  clearly  knowing 
that  their  continuance  as  a  body  depended  wholly  upon 
the  will  of  the  people.  Thus  the  power  of  Congress  was 
not  inherent,  but  directly  conferred,  and  could  be  easily 
abridged  or  withdrawn.  Prior  to  the  execution  of  the 
Articles  of  Confederation,  says  Madison,1  "  The  power  of 
Congress  was  measured  by  the  exigencies  of  the  war, 
and  derived  its  sanction  from  the  acquiescence  of  the 
States."  When  independence  was  declared,  the  States 
enlarged  somewhat  the  power  of  their  delegates;  yet  at 
all  times  they  were  unable  to  exercise  a  commanding 
authority,  such  as  the  occasion  imperatively  demanded 
for  fighting  successfully  the  battle  of  independence,  and 
for  stimulating  the  development  and  growth  of  an  infant 
nation.2 

Financially  the  Colonies  were  badly  off ;  for  they  had 
just  liquidated  the  debts  contracted  in  the  French  war, 

1  Writings,  vol.  iv.  p.  126. 

2  See  Hamilton's  Letter  to  Duane,  Sept.  3,  1780,  Hist,  of  Kepub., 
vol.  ii.  p.  86. 


8 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775. 


and  in  their  treasury  were  only  a  few  thousand  pounds.1 
Before  them  was  the  prospect  of  stagnation  or  interrup- 
tion of  trade,  and  possibly  warfare  with  Great  Britain. 
Neither  Congress  nor  the  Colonial  Governments  possessed 
credit.  Without  alliance  with  other  nations,  with  less 
than  twelve  million  dollars2  in  specie  in  all  the  Colonies, 
and  perhaps  not  half  that  sum,  —  such  was  the  financial 
condition  of  the  country  at  the  opening  of  the  second 
Continental  Congress. 

1  J.  Adams's  Works,  vol.  vii.  p.  296. 

2  Pelatiah  Webster,  Political  Essays,  p.  6,  note  c.  Hamilton  esti- 
mated the  "current  cash  in  this  country"  previous  to  the  war,  specie 
and  paper,  at  thirty  million  dollars,  of  which  sum  eight  millions  were 
specie  (Works,  vol.  i.  p.  228).  Noah  Webster  affirmed  that  "  ten  mil- 
lions of  dollars  in  specie  were  supposed  to  be  the  medium  in  America 
before  the  war"  (Coll.  of  Essays,  p.  133). 


/ 


I 

1775.]      ORGANIZATION  OF  TREASURY  DEPARTMENT.  9 


CHAPTER  II. 

ORGANIZATION  OF  THE  TREASURY  DEPARTMENT. 

To  organize  a  department  of  government  is  always 
difficult,  even  in  a  time  of  peace ;  but  the  difficulty  of 
organizing  the  various  departments  of  the  American 
Confederation  was  much  greater,  because  the  country 
was  enveloped  in  war  with  a  powerful  foe  possessing  a 
well-disciplined  army  and  a  never-failing  exchequer. 
America  was  poor :  the  specie  coming  here  quickly  found 
its  way  to  Great  Britain  by  the  operation  of  a  policy 
long  pursued  and  deemed  wise  by  the  mother-country. 
The  members  of  Congress  were  ignorant  of  legislative 
proceedings,  save  in  the  small  and  partially-stifled  Pro- 
vincial Assemblies.  The  colonists  had  never  administered 
the  affairs  of  state.  How  unreasonable,  therefore,  to 
suppose  them  capable  of  organizing  a  treasury,  war, 
navy,  and  other  departments,  without  many  delays  and 
embarrassments!  The  several  departments  of  the  Brit- 
ish Government  were  not  the  thought  of  the  day:  they 
were  the  growth  of  centuries.  The  departments  of  the 
Government  of  the  United  States  were  created  more 
rapidly,  though  not  without  trial  and  heavy  cost,  before 
reaching  their  greatest  efficiency. 

The  treasury  department  was  organized  earlier  than 
any  other  department  of  the  government.    By  the  genius 


10  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775. 

of  Hamilton,  during  the  first  administration  of  Washing- 
ton its  province  was  pretty  clearly  defined,  and  its  mode 
of  conducting  business  practically  established ;  yet  no  one 
can  understand  how  it  came  to  be  thus  organized,  until  he 
has  learned  how  the  finances  were  administered  during 
the  Revolution. 

As  independence  was  not  at  first  debated  in  Congress, 
and  every  one  was  seeking  to  find  a  peaceful  solution  of 
the  difficulties  with  Great  Britain,  the  early  financial 
measures  of  that  body  were  of  a  temporary  character. 
Committees  were  appointed  to  do  specific  things,  to  raise 
money,  to  pay  accounts,  and  the  like,  but  not  to  do  any 
thing  requiring  much  investigation,  or  outlay  of  money. 
The  method  of  devising  measures  through  committees, 
thus  early  adopted,  has  been  continued  to  this  day. 

The  first  financial  committee  were  appointed  on  the 
3d  of  June,  1775,  to  prepare  an  estimate  of  the  money 
required  to  pay  the  expenses  of  Congress.  This  com- 
mittee reported,  four  days  afterward,  in  favor  of  issuing 
bills  of  credit ;  and  their  report  was  subsequently  adopted. 
On  the  19th  of  July  another  committee  were  appointed, 
to  prepare  an  estimate  of  the  expenses  incurred  by  the 
resolutions  of  Congress.  Having  failed  to  report  as  soon 
as  Congress  desired,  on  the  6th  of  November  a  third 
committee  were  chosen  for  the  purpose,  who,  in  addition, 
were  required  to  ascertain  what  money  remained  in  the 
treasury  unapplied,  and  to  form  an  estimate  of  the 
public  debts  already  incurred,  and  which  were  likely  to 
become  due  by  the  1st  of  June  the  following  year.  This 
committee  lived  until  the  17th  of  February,  1776,  when 
a  standing  committee   of  five  for  superintending  the 


1776.]       ORGANIZATION  OF  TREASURY  DEPARTMENT.  11 

treasury  were  appointed.  The  powers  granted  to  them 
were  more  specific  and  extensive  than  the  powers  that 
had  been  delegated  to  any  other  committee :  they  were 
required  to  examine  the  accounts  of  the  treasurers  who 
had  been  appointed  to  receive  funds  from  the  Colonies, 
and  occasionally  to  report  to  Congress  the  condition  of 
the  treasury ;  to  consider  the  ways  and  means  for  sup- 
plying the  army  in  Canada  with  gold  and  silver ;  to  em- 
ploy and  instruct  proper  persons  for  liquidating  the 
public  accounts,  including  those  of  the  paymasters  and 
commissaries  in  the  Continental  service,  committees  of 
safety,  and  all  others  who  had  been  or  should  be  in- 
trusted with  the  public  money,  and  to  report  the  con- 
dition of  such  accounts  to  Congress ;  to  superintend  the 
emission  of  bills  of  credit;  and,  lastly,  to  obtain  from 
the  different  assemblies  and  conventions  of  the  United 
Colonies  the  number  of  inhabitants  in  each  Colony. 

From  time  to  time  the  powers  of  the  committee  were 
enlarged,  and  the  work  of  administering  the  finances  was 
systematized.  They  were  authorized  to  employ  clerks 
for  keeping  and  liquidating  the  public  accounts,  and  to 
provide  books  and  a  suitable  office  for  their  business. 
Power  was  also  given  them  to  call  upon  the  various 
committees  of  Congress,  assemblies,  conventions,  coun- 
cils or  committees  of  safety,  Continental  officers,  and 
private  persons  who  had  been  or  should  be  intrusted 
with  public  money,  for  their  accounts  and  vouchers,  and 
for  such  other  materials  and  information  as  the  commit- 
tee deemed  needful  "  in  stating,  checking,  and  auditing 
the  public  accounts." 1 

i  Feb.  23. 


12  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1776. 

As  the  resolution  conferring  this  power  was  deemed 
too  indefinite,  more  explicit  resolutions  were  soon  after 
adopted.1  A  treasury  office  of  accounts  was  instituted, 
to  be  kept  wherever  the  sessions  of  Congress  should  be 
held,  which  was  put  under  the  direction  and  superintend- 
ence of  the  standing  Committee  of  the  Treasury.  An 
auditor-general,  also,  together  with  a  proper  force  of 
assistants,  was  authorized  for  keeping  the  public  accounts. 
In  respect  to  the  presentation  of  accounts  at  this  time,  a 
portion  of  them  went  to  the  Committee  on  Claims ;  but 
all  accounts  and  claims  of  articles  the  price  of  which 
had  been  previously  fixed  by  contract,  or  otherwise  as- 
certained by  Congress,  were  liquidated  and  settled  at  the 
treasury  office,  and  reported  to  Congress  for  allowance, 
and  then  passed,  and  entered  at  the  place  of  liquidation. 
All  contracts,  securities,  and  obligations  belonging  to  the 
United  Colonies  were  lodged  and  kept  in  the  treasury 
office  of  accounts ;  and  any  one  receiving  public  money 
was  charged  with  the  same  in  the  books  of  the  treasury 
office ;  and  every  warrant  drawn  therefor,  previous  to  its 
payment,  was  entered  there,  while  entry  was  also  made 
upon  the  warrant  itself  by  one  of  the  committee  of  the 
treasury,  the  auditor-general,  or  one  of  his  assistants  or 
clerks.  An  exception,  however,  was  made  in  those  cases 
where  orders  or  warrants  were  issued  by  committees  ap- 
pointed by  Congress  to  draw  on  the  treasurers  for  par- 
ticular purposes.  These  orders  were  paid  directly,  and 
then  charged  to  the  committee  who  drew  them,  and 
afterwards  settled  by  Congress.  Other  financial  resolu- 
tions were  now  passed ;  yet,  as  they  were  but  little  more 

i  April  1. 


1775.]       ORGANIZATION  OF  TREASURY  DEPARTMENT.  13 


than  an  affirmation  of  previous  instructions  already  de- 
scribed, they  need  not  be  repeated. 

Several  names  were  given  to  this  committee,  though 
the  most  common  were  the  Board  of  Treasury  and  the 
Treasury  Office  of  Accounts.  During  the  year  1776 
five  more  members  were  added,  making  ten  in  all.1 

In  respect  to  auditing  and  paying  accounts,  perfection 
in  these  matters  could  not  be  expected  in  the  beginning. 
The  first  auditing  board  was  composed  of  the  delegates 
from  Pennsylvania,  concerning  whom  it  was  resolved  to 
place  ten  thousand  dollars  in  their  hands  for  the  purpose 
of  paying  the  expenses  incurred  in  raising  and  arming  rifle 
companies,  expresses,  and  other  small  charges  of  which 
Congress  had  not  been  able  to  procure  exact  accounts.2 

As  soon  as  Congress  re-assembled  in  1775,3  the  Penn- 
sylvania delegates  reported,  that,  on  account  of  various 
difficulties,  they  had  not  executed  the  duties  assigned  to 
them,  and  desired  that  some  members  from  other  Colonies 
where  debts  had  been  contracted  might  be  added ;  where- 
upon five  other  persons  were  chosen. 

Shortly  afterward  the  committee  made  a  report.4  They 
had  drawn  on  the  treasury  for  nearly  twelve  thousand 
dollars  to  settle  the  accounts  mentioned ;  and,  as  only  ten 
thousand  dollars  had  been  previously  placed  at  their 
command,  Congress  voted  an  appropriation  sufficient  to 
pay  the  balance.  The  committee  having  discovered  other 
outstanding  accounts  which  they  were  not  authorized  to 

1  Five  persons  were  at  first  chosen;  June  18  two  more  were  added; 
Sept.  23,  two  additional  members  were  chosen,  and  a  week  later  Hop- 
kinson  was  added. 

2  Aug.  1,  1775.  »  Sept.  14.  *  Sept.  25. 


14 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775. 


liquidate,  but  which  it  was  the  duty  of  Congress  to 
settle,  the  discovery  led  to  the  appointment  of  a  com- 
mittee of  accounts  or  claims,  consisting  of  one  member 
from  each  Colony,  to  whom  all  accounts  "  against  the 
Continent "  were  to  be  referred,  and  who  were  to  exam- 
ine and  report  upon  the  same  "  in  order  for  payment." 
The  appointment  of  this  committee  gave  rise  to  a  lively 
discussion,  which  John  Adams  has  reported  in  his  diary. 
When  Sherman  of  Connecticut  made  a  motion  for  the 
appointment  of  such  a  committee,  Harrison  of  Virginia 
supposed  it  was  a  reflection  upon  the  one  which  had 
just  reported  concerning  the  public  accounts,  and  he 
exclaimed,  "  Is  this  the  way  of  giving  thanks  ?  "  Samuel 
Adams,  who  seconded  Sherman's  motion,  replied  that  he 
meant  no  reflection  upon  the  committee,  and  "was  sorry 
that  the  worthy  gentleman  from  Virginia  conceived  that 
any  was  intended ;  he  was  sure  there  was  no  foundation 
for  it."  Another  member,  Paine,  thought  that  justice 
and  honor  required  a  careful  examination  of  all  accounts, 
and  how  the  public  moneys  were  expended,  "that  the 
minister  would  find  out  our  weakness,  and  would  foment 
divisions  among  our  people ;  he  was  sorry  that  gentlemen 
could  not  hear  methods  proposed  to  settle  and  pay  ac- 
counts, in  a  manner  that  would  give  satisfaction  to  the 
people,  without  seeming  to  resent  them."  As  this  ex- 
planation satisfied  Harrison,  he  rapidly  cooled,  the  motion 
for  the  appointment  of  the  committee  prevailed,  and,  the 
members  having  been  chosen,  the  former  committee  were 
directed  to  deliver  to  the  new  one  all  the  books,  accounts, 
and  papers  in  their  possession.1 

1  J.  Adams's  Works,  vol.  ii.  p.  450. 


Yd 


1776.]       ORGANIZATION  OF  TREASURY  DEPARTMENT.  15 

Their  mode  of  adjusting  accounts  was  to  examine  them, 
and  determine  what  was  due,  and  report  thereon  to  Con- 
gress without  recommendation ;  whereupon  that  body 
would  order  payment.  The  committee  then  drew  orders, 
in  conformity  with  the  direction  of  Congress,  upon  the 
Continental  treasurers  who  had  been  appointed  a  few 
months  previously ;  these  were  signed  by  the  president  of 
Congress,  after  which  they  were  ready  for  presentation  to 
the  treasurers,  who  paid  them  without  further  delay. 

When  the  powers  of  the  Board  of  Treasury  were  more 
minutely  defined  in  April,  the  following  year,1  it  was  pro- 
vided that  all  accounts  and  claims  against  the  United 
Colonies  for  services  or  supplies,  the  prices  of  which  had 
not  been  ascertained  by  Congress,  should  be  presented  to 
the  Committee  of  Claims,  liquidated  by  them,  and  re- 
ported to  Congress,  and,  having  been  allowed  by  that 
body,  should  be  "passed  at  the  treasury  office."  Thus 
the  duty  of  examining  the  accounts  of  Congress  was 
divided  between  the  Committee  of  Claims  and  the  Board 
of  Treasury,  and  so  continued  for  about  four  months, 
when  all  unsettled  claims  and  accounts  were  referred  to 
the  Board  of  Treasury,  and  the  Claims  Committee  were 
discharged.2  From  this  time  forth,  the  Board  of  Treasury 
were  required  to  provide  funds  for  sustaining  the  govern- 
ment, and  to  examine  and  liquidate  all  public  accounts. 

From  time  to  time,  commissioners  were  appointed  to 
settle  particular  accounts,  like  those  growing  out  of  the 
Canadian  expedition,  or  the  claims  between  the  Confed- 
eration and  New  York  and  Virginia,  the  accounts  of  the 
Northern  department,  army  accounts,  and  others  which 
had  grown  large,  and  could  not  be  easily  ascertained, 
i  April  1,  1776.  2  juiy  30. 


16         FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 

As  thus  organized,  the  Board  of  Treasury  continued 
nearly  two  years,  though  the  system  was  very  cumbrous 
and  inefficient.  It  was  impossible  for  the  delegates  of 
Congress  to  transact  the  business  of  the  treasury  depart- 
ment properly,  and  also  to  perform  their  duties  in  the 
sphere  of  legislation.  Morris  clearly  saw  the  inefficiency 
of  the  system.  Writing  to  the  Committee  of  Secret  Cor- 
respondence, near  the  close  of  1776,  he  very  plainly  says, 
"If  the  Congress  mean  to  succeed  in  this  contest,  they 
must  pay  good  executive  men  to  do  their  business  as  it 
ought  to  be,  and  not  lavish  millions  away  by  their  own 
mismanagement.  I  say  mismanagement,  because  no  man 
living  can  attend  the  daily  deliberations  of  Congress,  and 
do  executive  parts  of  business  at  the  same  time.  I  do 
aver  there  will  be  more  money  lost,  totally  lost,  in  horses, 
wagons,  cattle,  &c,  for  want  of  sufficient  number  of 
proper  persons  to  look  after  them,  than  would  have  paid 
all  the  salaries  Payne  [a  delegate  who  has  usually  found 
an  antitype  in  every  assembly  of  similar  character  since] 
ever  did  or  ever  will  grumble  at."1  Yet  nothing  more 
was  done  for  nearly  two  years,  at  the  end  of  which  time 
the  board  reported  several  important  changes  in  the  mode 
of  administering  the  finances. 

The  report  was  debated  several  weeks,  when  it  was 
resolved2  to  provide  a  house  at  Philadelphia  for  the 
several  offices  of  the  treasury,  which  were  to  be  the  fol- 
lowing: a  comptroller,  annually  appointed  by  Congress, 
who  was  authorized  to  employ  two  clerks ;  an  auditor  and 
two  clerks,  the  three  to  be  chosen  in  like  manner ;  a  treas- 
urer and  one  clerk,  similarly  chosen ;  and  two  chambers 

1  Am.  Archives,  fifth  series,  vol.  iii.  p.  1241.         2  Sept.  20. 


1778.]       ORGANIZATION  OF  TREASURY  DEPARTMENT. 


17 


of  accounts,1  each  chamber  consisting  of  three  commis- 
sioners and  two  clerks,  who  were  to  be  appointed  by  Con- 
gress. The  auditor,  treasurer,  and  comptroller  were  not 
to  be  appointed  by  the  votes  of  less  than  nine  States,  and 
they  were  to  be  responsible  for  the  conduct  of  their 
clerks,  —  a  provision  worthy  of  the  serious  consideration 
of  legislators  in  these  days,  when  so  much  incapacity,  and 
too  often  dishonesty,  abound  in  almost  every  department 
of  the  public  service. 

The  duties  of  each  officer  are  next  stated.  The  auditor 
was  to  receive  all  accounts  against  the  "  United  States  " 
for  money  lent,  expended,  or  advanced,  goods  sold  or 
purchased,  services  performed,  or  work  done,  with  the 
vouchers ;  and  he  was  to  refer  them  to  one  of  the  cham- 
bers of  accounts  after  indorsing  them  in  a  specified  man- 
ner ;  then  the  commissioners  were  to  deliver  them  to  their 
clerks  to  be  stated,  and  to  number  and  arrange  the  vouch- 
ers, examine  the  castings,  and  make  copies ;  and,  after 
completing  their  work,  they  were  to  make  a  proper  in- 
dorsement thereon ;  after  which  process  it  was  the  duty 
of  the  commissioners  to  examine  the  authenticity  of  the 
vouchers,  reject  all  which  did  not  appear  to  be  genuine, 
compare  them  with  the  articles  to  winch  they  related,  and 
determine  whether  they  supported  the  charges.  They 
were  to  reduce  such  articles  as  were  overcharged,  reject 
improper  charges,  and  then  indorse  the  accounts  in  the 
manner  prescribed  by  the  resolution,  and  transmit  them, 
with  the  vouchers,  to  the  auditor,  "and  cause  an  entry 
to  be  made  of  the  balances  passed."  Having  received 
the  vouchers  and  accounts  from  the  commissioners,  the 

1  This  idea  was  probably  copied  from  the  old  French  system  of  finance. 


18 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 


auditor,  or  rather  his  clerk,  was  to  examine  them.  The 
articles  were  to  be  compared  with  the  vouchers ;  and,  if  a 
person  appealed  from  the  judgment  of  the  commissioners, 
he,  as  well  as  they,  was  to  be  called  before  the  auditor 
to  be  heard,  from  whose  decision  no  appeal  lay,  except  to 
Congress.  Having  examined  the  accounts  in  this  manner, 
they  were  to  be  indorsed,  and  a  duplicate  of  the  indorse- 
ment was  to  be  filed  in  the  chamber  of  accounts,  while 
the  accounts,  with  their  vouchers,  were  to  be  sent  to  the 
comptroller. 

The  duties  of  the  comptroller  are  next  described,  which 
were  numerous  and  important.  He  was  to  keep  the 
treasury  books,  and  seal  and  file  all  accounts  and  vouch- 
ers, and  direct  the  manner  of  stating  and  keeping  them. 
He  was  to  draw  bills,  under  seal,  upon  the  treasurer,  for 
sums  clue  by  the  United  States  on  accounts  that  had  been 
audited,  which,  however,  were  to  be  countersigned  by 
the  auditor  previous  to  payment.  He  was  also  to  draw 
bills,  in  a  similar  way,  for  such  sums  as  Congress  from 
time  to  time  should  order.  When  moneys  were  due  the 
United  States  on  accounts  which  had  been  properly 
audited,  he  was  to  notify  the  debtor,  and,  after  hearing 
him  (if  he  desired  to  be  heard),  fix  a  day  for  payment  as 
the  circumstances  of  the  case  might  require,  not  exceed- 
ing ninety  days,  of  which  time  he  was  to  give  notice  in 
writing  to  the  auditor. 

The  treasurer  was  to  receive  and  keep  the  moneys  of 
the  United  States,  and  to  issue  them  on  bills  drawn  by 
the  comptroller,  as  previously  described,  and  file  dupli- 
cates thereof  with  the  auditor  day  by  day  as  he  should 
make  payment.    On  the  receipt  of  moneys,  he  was  re- 


1778.]       ORGANIZATION  OF  TREASURY  DEPARTMENT.  19 


quired  to  give  a  receipt  therefor,  and  transmit  the  same 
to  the  comptroller.  He  was  also  required  to  "  draw  out " 
and  settle  his  accounts  quarterly,  "  giving  the  same  in  to 
the  auditor  for  examination  by  one  of  the  chambers  of 
accounts,  to  be  from  thence  transmitted,  through  the 
auditor,  to  the  comptroller,"  who  was  required  to  compare 
them  with  the  treasury  books,  ascertain  the  balance,  and 
return  a  copy  thereof  to  Congress. 

The  resolution  further  provided  that  the  comptroller 
should  receive  from  the  treasurer  all  receipts  signed 
by  himself,  and,  after  entering  them,  charge  the  treas- 
urer, and  credit  the  proper  accounts ;  this  done,  the 
comptroller  was  to  indorse  them,  and  deliver  them  to 
the  party  who  made  payment ;  and  every  quarter  of 
the  year  he  was  to  cause  a  list  of  the  balances  on  the 
treasury-books  to  be  made  out  by  his  clerks,  and  lay 
the  same  before  Congress.  To  this  provision  another  was 
added  relating  to  the  collection  of  money  due  to  the 
United  States,  which  clearly  displayed  the  weakness 
of  the  government.  In  all  cases  of  delinquency  the 
comptroller  was  to  give  the  debtor  a  reasonable  time 
to  appear;  and,  in  case  he  did  not,  the  auditor,  on 
proof  that  proper  notice  had  been  sent,  made  out  a 
requisition,  the  form  of  which  was  prescribed  in  the 
act,  which  was  sent  by  the  comptroller  to  whom?  To 
the  debtor?  No,  but  to  the  executive  authority  of  the 
State  wherein  the  debtor  resided.  Congress  dared  go 
no  further  than  to  recommend  the  States  to  enact  laws 
for  the  seizure  of  property  and  persons  of  debtors  to 
the  United  States  neglecting  to  discharge  their  public 
obligations. 


20 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 


This  act  indicates  great  progress  in  the  mode  of 
collecting  and  disbursing  the  public  revenues.  Several 
of  its  more  important  features  are  still  preserved,  and 
it  would  be  quite  difficult  to  improve  them.  If  to  any 
one,  either  at  that  time  or  afterward,  Congress  seemed 
slow  in  organizing  the  treasury  department,  the  vast- 
ness  as  well  as  the  suddenness  of  the  Revolution, — for, 
after  all,  the  event  was  unexpected,  notwithstanding 
the  long,  unconscious  course  of  preparation,  —  and  the 
feebleness  of  the  country's  resources,  must  be  remem- 
bered as  among  the  chief  causes  of  dilatory  action  by 
that  memorable  body. 

More  than  a  month  elapsed  before  filling  the  several 
offices  of  the  treasury.1  Jonathan  Trumbull,  jun.,  was 
elected  comptroller ;  John  Gibson,  auditor ;  and  Michael 
Hillegas,  who  had  held  the  office  of  treasurer  from  the 
beginning,  was  continued  in  the  same  position.  Since 
the  resignation  of  Mr.  Clymer,  Hillegas  had  acted  as 
sole  treasurer,  and,  from  his  continuance  in  that  office, 
had  probably  administered  it  in  a  successful  manner. 
Commissioners  of  the  chambers  of  accounts  were  also 
chosen.  To  the  comptroller  and  treasurer  was  given  a 
salary  of  four  thousand  dollars;  the  auditor  received 
thirty-five  hundred  dollars ;  and  the  commissioners,  each 
three  thousand  dollars.2  Subsequently  a  secretary  to  the 
Board  of  Treasury  was  appointed,  with  a  salary  of  two 
thousand  dollars  per  annum.3 

Marked  as  were  the  improvements  in  the  treasury  de- 

1  Nov.  3.  2  Oct.  29. 

8  Feb.  11,  1779.  But  a  secretary  was  not  appointed  until  May  29 
of  that  year,  when  Robert  Troup  was  chosen. 


1779.]       ORGANIZATION  OF  TREASURY  DEPARTMENT.  21 

partrnent,  within  twelve  months  another  re-organization 
occurred.1  A  very  considerable  portion  of  the  former 
organization  was  retained.  The  principal  new  feature 
was  the  abolition  of  the  comptroller's  office,  and  the 
addition  of  a  board  consisting  of  three  commissioners 
who  were  not  members  of  Congress,  besides  two  other 
persons  belonging  to  that  body.  These  five  members 
were  elected  by  Congress,  the  former  three  annually, 
and  the  latter  two  for  the  term  of  six  months;  nor 
could  a  State  be  represented  at  any  time  by  more  than 
one  member  in  the  board.  The  other  officers  of  the 
treasury  were  retained,  with  the  addition  of  six  auditors 
for  settling  the  accounts  of  the  army. 

"The  Commissioners,  or  Board  of  Treasury,"  as  the 
new  body  is  called  in  the  ordinance,  were  to  have  the 
general  superintendence  of  the  finances  of  the  United 
States,  and  of  the  officers  intrusted  with  the  receipt 
and  expenditure  or  application  of  the  public  money; 
to  inspect  the  treasury;  to  lay  before  Congress  esti- 
mates of  the  public  expenses  and  necessary  supplies; 
to  execute  the  will  of  Congress  respecting  the  emission 
of  bills  of  credit  and  of  exchange,  loan-office  certificates 
or  other  securities,  and  establishing  lotteries;  deposit 
the  public  funds  in  proper  places;  look  after  the  keep- 
ing of  accounts  and  the  punishment  of  public  debtors; 
instruct  all  officers  in  any  way  connected  with  the 
finances  needing  instruction,  and  to  suspend  any  of 
them  for  negligence  or  misdemeanor  until  the  pleasure 
of  Congress  was  known ;  register  and  preserve  all  con- 
tracts and  securities;  grant,  under  the  seal  of  office, 


i  July  30. 


22         FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 

"a  quietus"  to  accountants  on  final  settlement;  and 
various  other  duties  which  do  not  need  specifying. 
The  duties  of  the  auditor-general,  treasurer,  and  the 
chambers  of  accounts,  were  more  minutely  defined. 
The  auditors  of  the  army  were  sorely  needed  to  ad- 
just the  numerous  accounts  growing  out  of  the  neg- 
lect, or  rather  impossibility,  of  the  Board  of  Treasury 
to  settle  them.  These  auditors  were  to  report  to  the 
auditor-general,  and  were  directed  to  adjust  all  other 
accounts,  besides  those  specifically  mentioned,  ordered 
by  the  Treasury  Board.  The  officers  under  the  old 
system,  except  those  belonging  to  the  comptroller's 
office,  were  continued  until  the  9th  of  November,  when 
a  new  election  was  made,  though  many  of  the  former 
officers  were  elected  to  various  positions  in  the  new 
organization. 

As  thus  organized,  the  Board  of  Treasury  continued 
in  power  until  the  appointment  of  Robert  Morris  as 
superintendent  of  finance,  in  February,1  1781,  and,  in- 
deed, for  several  months  thereafter,  when  the  organi- 
sation was  finally  abolished.2    As  the  appointment  of 

1  Feb.  20. 

2  Hamilton,  writing  in  September,  1780,  about  the  imperfection  of 
the  present  system,  says,  "A  single  man,  in  each  department  of  the 
administration,  would  be  greatly  preferable.  It  would  give  us  a  chance 
of  more  knowledge,  more  activity,  more  responsibility,  and,  of  course, 
more  zeal  and  attention.  Boards  partake  of  a  part  of  the  incon- 
veniences of  larger  assemblies ;  —  their  decisions  are  slower,  their  energy 
less,  their  responsibility  more  diffused.  They  will  not  have  the  same 
abilities  and  knowledge  as  an  administration  by  single  men.  Men  of 
the  first  pretensions  will  not  so  readily  engage  in  them,  because  they 
will  be  less  conspicuous,  of  less  importance,  have  less  opportunity 
of  distinguishing  themselves.   The  members  of  boards  will  take  less 


1779.]      ORGANIZATION  OF  TREASURY  DEPARTMENT.  23 


Morris  marks  a  new  era  in  the  finances  of  the  Revolu- 
tion, we  shall  wait  until  reaching  his  administration 
before  describing  the  machinery  employed  to  administer 
the  finances  during  that  period.  We  have  traced  the 
history  of  organizing  the  treasury  department  through 
the  embryonic,  or  rather  chaotic,  period  of  the  govern- 
ment; we  have  seen  order  gradually  arise  out  of  confu- 
sion, which  was  the  more  remarkable  because  Congress, 
in  the  earlier  days,  was  expecting  to  make  peace  with 
Great  Britain.  When  this  delusion  faded  away,  and 
Congress  undertook  seriously  the  work  of  organizing 
permanently  the  several  departments  of  government, 
ought  not  the  members  to  be  praised  rather  than 
blamed,  considering  the  grave  difficulties  besetting  their 
path,  for  creating  a  practical  financial  system  as  rapidly 
as  they  did? 

pains  to  inform  themselves,  and  arrive  at  eminence,  because  they  have 
fewer  motives  to  do  it.  All  these  reasons  conspire  to  give  a  preference 
to  the  plan  of  vesting  the  great  executive  departments  of  the  State 
in  the  hands  of  individuals.  As  these  men  will  be,  of  course,  at  all 
times  under  the  direction  of  Congress,  we  shall  blend  the  advantages 
of  a  monarchy  and  republic  in  one  constitution.  A  question  has  been 
made,  whether  single  men  could  be  found  to  undertake  these  offices. 
I  think  they  could ;  because  there  would  be  then  every  thing  to  excite 
the  ambition  of  candidates.  But  in  order  to  this,  Congress,  by  their 
manner  of  appointing  them,  and  the  line  of  duty  marked  out,  must 
show  that  they  are  in  earnest  in  making  these  offices,  offices  of  little 
trust  and  importance.  I  fear  a  little  vanity  has  stood  in  the  way  of 
these  arrangements,  as  though  they  would  lessen  the  importance  of 
Congress,  and  leave  them  nothing  to  do"  —  Hist,  of  Bepub.,  vol.  ii. 
pp.  92,  93. 


24 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775. 


CHAPTER  III. 

THE  FIRST  ISSUE  OF  CONTINENTAL  MONEY. 

At  the  opening  of  the  second  session,  Congress  began 
to  wrestle  with  the  question  of  raising  money  to  maintain 
the  government.  -/An  issue  of  bills  of  credit  —  with  which 
all  the  Colonies  were  familiar — was  regarded  as  the  best 
expedient ;  yet  several  weeks  elapsed  before  taking  final 
action  thereon.  In  the  mean  time,  the  matter  was  referred 
to  the  several  Colonial  Assemblies  for  their  opinion.1 
Previous  to  this  reference,  the  Provincial  Assembly  of 
New  York  had  appointed  a  committee  to  consider  the 
propriety  of  emitting  a  Continental  paper  currency ;  and 
on  the  26th  of  May,  1775,  the  Assembly  addressed  a  letter 
to  the  Congressional  delegates  representing  that  Colony, 
on  the  subject.  To  the  scheme  of  issuing  a  universal 
paper  currency,  says  the  address,  "it  may  naturally  be 
objected,  that  it  will  be  imprudent  in  one  Colony  to  inter- 
pose its  credit  for  the  others.  On  the  other  hand,  it  is 
clearly  impossible  to  raise  any  sum  adequate  to  the  ser- 
vice, by  tax;  and  the  necessary  intercourse  of  expendi- 
tures throughout  the  Colonies  will  be  obstructed  by 
separate  emissions  on  the  respective  credits  of  the  sev- 
eral Colonies,  which  cannot,  in  their  nature,  gain  uni- 

1  See  Letter  of  Lieut. -Gov.  Colden  to  the  Earl  of  Dartmouth,  Docu- 
ments relating  to  Col.  ilist.  of  New  York,  vol.  viii.  p.  579. 


1775.]       THE  FIRST  ISSUE  OF  CONTINENTAL  MONEY.  25 

versal  circulation.  We  have  this  important  subject  under 
serious  deliberation,  and  are  still  at  a  loss  for  the  best 
expedient  most  effectually  to  answer  the  purpose.  We 
have  therefore  appointed  a  committee  of  our  body  to 
give  it  their  closest  attention,"  whose  report  was  to  be 
communicated  to  the  delegates  without  delay.  If  Con- 
gress is  considering  the  subject,  concludes  the  letter,  "  we 
earnestly  request  that  its  determination  may  be  so  post- 
poned as  to  furnish  an  opportunity  of  acquainting  you 
with  our  more  mature  sentiments  on  this  most  important 
point."  1 

The  delegates  from  New  York  were  not  blind  to  the 
importance  of  the  question  and  to  the  need  of  a  better 
knowledge  concerning  it.  This  is  shown  by  their  reply 
to  the  letter  of  the  Assembly,  in  which  they  express  the 
wish  of  a  speedy  determination,  "as  it  may  throw  some 
light  upon  the  subject  we  may  otherwise  want."  Dark, 
indeed,  was  the  subject  in  the  beginning;  yet  it  grew 
darker  as  the  days  and  years  went  by. 

Not  long  afterward,  the  report  of  the  committee,  pre- 
pared by  Governeur  Morris,  was  sent  to  Philadelphia, 
where  Congress  was  in  session.  It  displays  a  pretty  thor- 
ough comprehension  of  the  situation,  and  evinces  a  high 
order  of  financial  ability,  which  the  author  on  more  than 
one  occasion  subsequently  exhibited.  Concluding  an  issue 
of  paper  money  by  Congress  to  be  necessary,  the  report 
discusses  the  several  modes  of  issuing  it,  which  were  the 
following:  first,  "that  every  Colony  should  strike  for 
itself  the  sum  apportioned  by  the  Continental  Congress ; 
secondly,  that  the  Continental  Congress  should  strike  the 

1  Am.  Archives,  fourth  series,  vol.  ii.  p.  845. 


26  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775. 

whole  sum .  necessary,  and  each  Colony  become  bound  to 
sink  its  proportionable  part ;  or,  thirdly,  that  the  Con- 
tinental Congress  should  strike  the  whole  sum,  and  ap- 
porttonate  the  several  shares  to  the  different  Colonies," 
everly  Colony  becoming  bound  to  discharge  its  own  par- 
ticular part,  and  all  the  Colonies  to  discharge  the  portion 
which  any  particular  Colony  should  be  unable  to  pay. 
The  committee  recommended  the  adoption  of  the  latter 
plan,  sagely  remarking  that  there  were  only  two  obstacles 
in  the  way  of  emitting  paper  money :  the  first  was,  "  to 
give  it  an  immediate  and  ready  currency ; "  and  the 
second,  "to  provide  ways  and  means  for  sinking  it." 
They  had  no  doubt  about  its  ready  reception  throughout 
the  Continent ;  and,  on  the  second  point,  the  committee 
observed,  that  "whenever  a  paper  currency  has  been 
emitted,  and  obtained  a  general  credit,  it  will  be  a  new 
bond  of  union  to  the  associated  Colonies,  and  every 
inhabitant  thereof  will  be  bound  in  interest  to  endeavor 
that  ways  and  means  be  fallen  upon  for  sinking  of 
it." 1 

Before  any  plan  had  been  perfected,  the  need  of  money 
to  purchase  powder  for  the  Continental  army,  which  was 
already  organized,  had  become  so  great,  that  Congress 
resolved  to  borrow  six  thousand  pounds  for  the  defence 
of  America,  pledging  the  faith  of  the  Colonies  for  re- 
payment.2 The  Pennsylvania  delegation  were  appointed 
a  committee  to  execute  the  resolution.  Phillips  says,3 
"  The  desire  of  borrowing  so  small  a  sum,  which  even  if 
obtained  would  have  been  of  very  slight  assistance,  shows 

1  Am.  Archives,  fourth  series,  vol.  ii.  p.  1202. 

2  June  3,  Secret  Jour,  of  Cong.       8  Cout.  Paper  Money,  p.  23. 


1775.]       THE  FIRST  ISSUE  OF  CONTINENTAL  MONEY. 


27 


conclusively  the  reluctance  of  Congress  to  use  its  paper 
credit."  May  not  the  reason  have  been,  that  Congress 
needed  only  a  small  sum  as  a  temporary  expedient  while 
perfecting  a  plan  for  the  issue  of  paper  money?  As  only 
six  thousand  pounds  were  borrowed,  is  not  the  inference 
very  strong  that  Congress  expected  to  issue  paper  money 
at  an  early  day,  otherwise  a  much  larger  sum  would  have 
been  absolutely  necessary?  Congress  afterward  ordered 
sixteen  thousand  dollars  in  Continental  bills  to  be  paid 
for  the  specie  thus  obtained.1 

What  opposition  was  made  to  issuing  paper  money  we 
have  only  scanty  information.  The  records  of  Congress 
are  silent  concerning  the  discussion  of  all  questions ;  and 
we  can  glean  but  little  from  the  votes  of  Congress  and 
the  hints  of  members.  Had  not  secrecy  upon  their  pro- 
ceedings been  enjoined,  which  was  most  faithfully  kept, 
doubtless  the  letters  and  diaries  of  some  of  the  members 
would  have  thrown  much  light  upon  the  deliberations 
of  that  body:  in  consequence  of  this  injunction,  how- 
ever, not  much  knowledge  can  be  gleaned,  even  from 
these  sources. 

Two  kinds  of  paper  money  had  been  tried  in  the  Colo- 
nies, with  a  marked  difference  in  their  operation.  The 
improved  method  had  been  practised  most  successfully  in 
Pennsylvania,  and  consisted  in  emitting  a  certain  amount 
of  paper  for  a  given  time,  say  ten  years,  at  the  expira- 
tion of  which  period  it  was  all  redeemed.  The  paper  was 
put  into  circulation  in  the  form  of  loans  to  individuals, 
secured  by  mortgages  on  their  land.  One-tenth  of  each 
loan  was  repaid  annually,  with  interest.    Thus,  at  the 


i  Aug.  l. 


28  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775. 

end  of  ten  years,  the  whole  was  returned  to  the  loan 
offices,  and  redeemed ;  the  government  in  the  mean  time 
having  gained  the  interest,  and  the  community  having 
had  the  benefit  of  the  circulation.  It  was  made  a  legal 
tender  for  the  payment  of  debts,  and  it  generally  main- 
tained its  original  value,  with  slight  fluctuations  caused 
by  the  rise  of  gold  and  silver  when  a  larger  quantity  of 
these  metals  than  usual  was  wanted  for  exportation.1 
This  form  of  paper  currency  delighted  Pownall,  an  English 
writer  upon  the  "  Administration  of  the  Colonies ;  " 2  for 
he  declares  that  "paper  money  thus  lent  upon  interest 
will  create  gold  and  silver  in  principal,  while  the  interest 
becomes  a  reserve  that  pays  the  charges  of  government. 
This  currency  is  the  true  Pactolian  stream,  which  con- 
verts all  into  gold  that  is  washed  by  it."3  The  other 
kind  of  paper  money  was  emitted  by  a  Colony,  upon  the 
pledge  of  certain  taxes,  which  were  considered  sufficient 
to  redeem  it  within  a  specified  time.  This  was  the  older 
and  more  general  method  employed  among  the  Colonies. 

The  bill  passed  by  Congress,  authorizing  the  first  issue 
of  bills  of  credit,  certainly  encountered  the  opposition  of 
Franklin;  for  he  wrote  to  Samuel  Cooper  that  he  took 
all  the  pains  he  could  in  Congress  to  prevent  their  depre- 
ciation, by  proposing  that  the  bills  should  bear  interest. 
This  amendment,  however,  was  rejected,  and  they  were 
struck  in  a  different  manner.4    It  is  quite  probable  that 

1  Sparks's  Franklin,  vol.  i.  p.  303.  This  plan  evidently  grew  out 
of  the  bank  experiment  of  South  Carolina,  devised  in  1712. 

2  4th  ed.,  p.  186. 

8  Bills  of  credit  had  been  issued  as  loans  in  New  Hampshire,  based 
upon  real-estate  security.  —  Belknap,  Hist,  of  New  Hampshire,  vol.  i. 
p.  378. 

4  Sparks's  Franklin,  vol.  viii.  p.  328. 


1775.]       THE  FIRST  ISSUE  OF  CONTINENTAL  MONEY. 


29 


other  delegates  shared  his  views,  or  favored  the  adoption 
of  the  Pennsylvania  plan,  which  had  proved  so  success- 
ful ;  for,  as  the  need  of  money  was  very  great,  had  there 
been  no  opposition  to  the  report  of  the  committee,  it 
would  have  been  speedily  adopted.  Both  Congress  and 
the  Colonies  needed  funds,  yet  congressional  action  was 
delayed. 

Paper  money  had  been  tried  in  all  the  Colonies,  and 
nowhere  had  the  experiment  worked  satisfactorily,  save 
in  Pennsylvania.  Of  all  the  numerous  issues,  none  had 
been  redeemed  in  conformity  with  the  promise  of  the 
government ;  and  hardship,  extravagance,  and  corruption, 
even  in  those  primitive  days,  had  grown  out  of  the  em- 
ployment of  paper  money.1    We  may  readily  believe  that 

1  Ramsay  says  that  the  issue  of  paper  money  "  was  in  some  degree 
owing  to  a  previous  confidence,  which  had  been  begotten  by  honesty 
and  fidelity,  in  discharging  the  engagements  of  government.  From  New 
York  to  Georgia  there  never  had  been  in  matters  relating  to  money,  an 
instance  of  a  breach  of  faith.  In  the  scarcity  of  gold  and  silver,  many 
emergencies  had  imposed  a  necessity  of  emitting  bills  of  credit.  These 
had  been  uniformly  and  honestly  redeemed."  (Hist,  of  Am.  Rev.,  vol. 
ii.  p.  132,  ed.  1789.)  The  truth  is,  hardly  a  case  had  occurred  in  which 
the  Colonies  redeemed  their  bills  in  fulfilment  of  the  promise  written 
thereon.  John  Adams  wrote  to  Count  de  Vergennes  in  1780,  "  In  the 
late  Province  of  the  Massachusetts  Bay,  from  the  years  1745  to  1750,  we 
had  full  experience  of  the  operation  of  paper  money.  The  Province 
engaged  in  expensive  expeditions  against  Louisburg  and  Canada,  which 
occasioned  a  too  plentiful  emission  of  paper  money,  in  consequence  of 
which  it  depreciated  to  seven  and  a  half  for  one.  In  1750,  the  British 
Parliament  granted  a  sum  of  money  to  the  Province  to  reimburse  it  for 
what  it  had  expended  more  than  its  proportion  in  the  general  expense  of 
the  empire.  This  sum  was  brought  over  to  Boston  in  silver  and  gold, 
and  the  Legislature  determined  to  redeem  all  their  paper  with  it  at  the 
depreciated  value.    There  was  a  similar  alarm  at  first,  and  before  the 


30  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775. 

more  than  one  delegate  knew  of  the  evils  springing  from 
the  use  of  credit  as  money.  John  Adams  had  "seen 
paper  annihilated  at  a  blow,  in  Massachusetts,  in  1750  :  " 
was  not  this  event  enough  to  make  him  sceptical  respect- 
ing the  virtues  of  paper  money  ?  That  he  was  no  friend 
of  it,  is  evident  from  his  reply  to  the  letter  of  John 
Taylor,  recommending  the  latter  to  read  Count  Destutt 
Tracy's  work  upon  "Political  Economy,"  which  had 
just  been  translated  by  Jefferson.  Adams  says,  "His 
chapter  4  Of  Money '  contains  the  sentiments  that  I  have 
entertained  all  my  lifetime."  After  quoting  a  passage 
declaring  that  to  diminish  the  quantity  of  metals  in 
coins  is  to  steal,  the  quotation  continues:  "A  theft  of 
greater  magnitude  and  still  more  ruinous,  is  the  making 
of  paper  money;  it  is  greater,  because  in  this  money 
there  is  absolutely  no  real  value ;  it  is  more  ruinous, 
because,  by  its  gradual  depreciation  during  all  the  time 
of  its  existence,  it  produces  the  effect  which  would  be 
produced  by  an  infinity  of  successive  deteriorations  of  the 
coins.  All  these  iniquities  are  founded  on  the  false  idea, 
that  money  is  but  a  sign."  1  If  John  Adams  entertained 
these  sentiments  all  his  lifetime,  as  he  affirms  he  did,  he 

matter  was  understood,  but  after  the  people  had  time  to  think  upon  it, 
all  were  satisfied  to  receive  silver  at  fifty  shillings  an  ounce,  although 
the  face  of  the  bills  promised  an  ounce  of  silver  for  every  six  shillings 
and  eightpence."  (Works,  vol.  vii.  p.  200.)  Paper  money  passed  at 
seven  for  one  of  specie  in  South  Carolina  in  consequence  of  the  wars  of 
1739  and  of  1750,  and,  "  for  many  years  anterior  to  the  commencement 
of  the  late  unhappy  distractions,  payments  were  made  in  specie  in 
the  proportion,  it  is  imagined,  of  eight  or  nine  for  one  of  the  paper 
currency"  [Observations  of  English  Commissioners,  Nov.  25,  1780, 
Almon'k  Rememb.y  1781,  part  1,  pp.  214,  215). 
i  Works,  vol.  x.  p.  376. 


17  75.]       THE  FIRST  ISSUE  OF  CONTINENTAL  MONEY. 


31 


could  not  have  favored  the  issue  of  paper  money  by  the 
Continental  Congress. 

However  divergent  were  the  views  of  the  delegates 
upon  the  question  of  issuing  paper  money,  or  the  mode 
of  issuing  it,  Congress  decided,  near  the  end  of  June,1  to 
issue  bills  of  credit,  not  exceeding  two  million  Spanish 
milled  dollars,2  pledging  the  faith  of  the  twelve  Confed- 

1  June  22. 

2  The  standard  Spanish  pillar  dollar  contained,  of  fine  silver,  385.72, 
and  of  alloy  31.75  grains. 

Various  explanations  of  the  dollar-mark,  and  when  it  was  intro- 
duced, have  been  put  forth ;  but  the  following  explanation,  which  first 
appeared  in  the  Historical  Magazine,  is  the  most  satisfactory  of  any  we 
have  seen. 

"The  dollar-mark  ($)  appears  to  have  derived  its  origin  from  the 
ancient  Romans  through  the  modern  Italians,  and  specially  through 
those  great  traders  and  money-dealers  of  mediieval  Europe,  the  Lom- 
bards. 

"Amongst  the  ciphers  and  abbreviations  of  the  Romans,  we  find 
(Ursato  de  notis  Romanorum  Patav.  1672)  some  with  horizontal  lines, 
as  g,  TIS  (sestertius,  sestertium);  and  some,  though  but  few,  with 
sloping  and  not  quite  upright  lines,  such  as  are  now  used  in  the  dollar- 
mark.  Amongst  this  smaller  number  we  find  the  form  g  (semis, 
weight,  or  coin),  which  is  probably  the  origin  of  the  modern  $. 

"This  last,  which  is  now  employed  as  the  dollar-mark,  came  into  use 
in  the  middle  ages,  to  express  the  current  value  of  the  old  Spanish 
dollar,  which  was  good  for  eight  reals.  Of  this  value  the  dollar-mark  is 
not  merely  an  arbitrary  token,  but  a  significant  representative. 

"  The  Spanish  dollar,  being  equivalent  to  eight  reals,  used  to  be  called 
accordingly,  in  French,  '  piece  de  huit ; '  in  German,  stuck  von  achten ; 
in  Italian,  pezzo  d'otto  ;  in  English,  a  piece  of  eight.  This  will  account 
for  one  component  part  of  the  dollar-mark,  namely,  the  figure  of  8.  In 
Spanish,  also,  the  dollar  was  called  pieza  de  a  ocho. 

"But  the  two  sloping  lines  of  the  dollar-mark  (||)  have  also  their 
explanation.  Among  the  old  Spanish  dollars  those  are  decidedly  best 
which  bear  on  their  reverse  two  pillars,  or  columns,  and  which  have 


32         FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775. 


erate  Colonies  for  their  redemption.  This  was  the  plan 
recommended  by  the  committee  of  the  New-York  Assem- 
bly, and  it  received  the  support  of  the  delegates  repre- 
senting that  Colony  in  Congress. 

The  next  day  some  minor  matters  respecting  the  bills 
were  settled,  and  a  committee,  consisting  of  John  Adams, 
John  Rutledge,  James  Duane,  Benjamin  Franklin,  and 
James  Wilson,  were  appointed  to  engrave  the  plates, 
procure  paper,  and  arrange  for  printing  the  notes.  Frank- 
therefore  been  termed  pillared  dollars.  These  two  pillars,  a  little  sloped 
by  the  pen,  do  duty  as  the  two  parallel  lines,  which,  combined  with  the 
figure  of  8,  compose  the  dollar-mark. 

"It  has  been  supposed,  indeed,  that  the  two  lines  in  question  are  the 
double  1  of  the  word  castellano,  which  sometimes  stood  in  old  Spanish 
for  a  dollar;  or  that  they  are  perhaps  taken  from  the  word  ve^on, 
which  is  still  used  in  the  phrase,  'reals  vellon.'  But  the  explanation 
first  given  seems  preferable  to  either  of  these,  which  are  a  little  far- 
fetched, and  will  not  bear  examination." 

When  the  dollar-mark  was  first  used  is  a  question  not  so  easy  to 
answer.  "  The  reply,  however,  lies  within  certain  limits,  to  determine 
which  we  must  go  a  little  way  into  the  history  of  the  Spanish  dollar. 

"  '  Dollar '  is  not,  after  all,  a  Spanish  term.  The  word  is  German  and 
Dutch  (thaler,  daalder,  and,  in  old  Dutch,  daelder).  The  Spanish  name 
is  peso ;  and  it  was  not  till,  under  Charles  V.,  the  Spanish  peso,  bearing 
his  name  as  King  of  Spain,  began  to  be  struck  in  Holland  and  Germany , 
that  the  peso  began  to  be  called  a  dollar  (thaler,  or  daelder).  Then, 
also,  the  mark  $  appears  to  have  first  attached  itself,  for  distinction,  to 
the  Spanish  peso,  or  thaler.  The  Spaniards  had  no  need  of  a  mark 
which  merely  indicates  that  their  peso  was  worth  eight  good  reals ;  for 
they  all  knew  it.  But  the  old  thalers  of  Holland  and  Germany,  coined 
long  before  the  time  of  Charles  V.,  had  various  values;  and  therefore  it 
was  very  natural,  when  a  new  Spanish  coin  appeared  in  the  midst  of 
them,  and  acquired  the  name  of  thaler,  that  the  Lombards  and  others 
Who  dealt  in  money  should  designate  the  new  variety  by  a  distinguishing 
mark,  which  indicated  that  this  was  a  dollar  of  eight  reals."  —  Vol.  i. 
p.  245. 


1775.]       THE  FIRST  ISSUE  OF  CONTINENTAL  MONEY. 


33 


lin  was  more  familiar  with  this  work  than  any  other 
member,  as  he  had  printed  paper  money  for  the  Colony 
of  New  Jersey,  and  devised  the  first  copper-plate  press 
for  printing  the  bills. 

The  Continental  bills  were  of  several  denominations, 
from  one  to  twenty  dollars,  and  in  form  as  follows :  — 

Continental  Currency. 
No.  Dollars. 
This  bill  entitles  the  bearer  to  receive  Spanish  milled 

dollars,  or  the  value  thereof  in  Gold  or  Silver,  according  to  the 
resolutions  of  the  Congress,  held  at  Philadelphia,  on  the  10th 
day  of  Ma}',  A.  D.,  1775. 

In  thus  issuing  paper  money,  it  has  been  affirmed  that 
Congress  committed  two  capital  errors:  first,  in  issuing 
any  bills  whatever ;  and,  secondly,  in  not  taxing  the 
Colonies  immediately  to  redeem  them.  It  is  easy  for  us 
to  discover  errors  strewn  over  the  past;  but,  to  judge 
fairly  of  the  wisdom  or  ignorance  displayed  by  Congress, 
we  must  transport  ourselves  back  to  those  troubled  times, 
and  survey  as  accurately  as  possible  the  situation  of  the 
actors  of  that  period. 

In  the  first  place,  when  this  issue  was  ordered,  it  was 
not  believed  that  the  sum  would  be  very  much,  if  at  all, 
increased.  Never  in  the  history  of  issuing  paper  money 
has  any  one  supposed  that  a  large  amount  would  be  forth- 
coming. This  is  one  of  the  dangers  of  embarking  upon 
this  always  deceptive  sea.  One  issue  authorized,  others 
are  sure  to  follow ;  but  the  Continental  Congress  of  1775, 
like  the  Congress  of  1863,  never  intended,  in  the  begin- 
ning, to  flood  the  country  with  paper  money.    No  one 


34  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775. 

dreamed  of  the  long  and  fearful  contest  before  the  coun- 
try. When,  therefore,  the  first  issue  appeared,  it  was 
thought  the  trouble  with  great  Britain  would  be  soon 
adjusted ;  that  the  total  amount  of  paper  issues  would  be 
small,  and  consequently  could  be  easily  discharged. 

Nor  did  Congress  suppose  that  paper  money  would 
float  without  taxing  the  Colonies  for  its  redemption. 
Accordingly,  Congress  apportioned  to  each  Colony  its 
share  of  the  sum  required,  on  the  basis  of  population. 
True,  this  was  an  injustice;  but  what  else  could  Con- 
gress do  ?  It  was  impossible  to  form  an  accurate  idea 
of  the  wealth  of  the  Colonies ;  and,  though  the  estimate 
of  the  inhabitants  was  a  crude  one,  yet,  so  far  as  we 
can  discover,  it  was  the  most  satisfactory  basis  which 
could  be  adopted. 

Bronson  and  other  writers  declare  that  Congress  ought 
to  have  assessed  and  collected  taxes,  leaving  no  au- 
thority to  the  States  upon  the  subject.  But  Ramsay, 
Bancroft,  and  many  other  historians,  assert  that  Con- 
gress had  no  power  to  tax  the  Colonies.  This  answer 
is  true  in  one  sense,  though  not  in  another.  Congress 
had  no  authority  to  tax  the  Colonies :  on  the  other  hand, 
there  was  no  legal  prohibition.  Congress  had  just  as 
much  power  to  tax,  as  to  issue  bills  of  credit.  Whether 
Congress  should  tax  them,  or  not,  was  a  question  of  ex- 
pediency. The  course  to  be  pursued  depended  on  the 
temper  of  the  people.  Congress  was  obliged  to  look 
to  them  for  the  sanction  and  enforcement  of  all  legisla- 
tion. There  was  no  wisdom  in  enacting  a  law  which  the 
people  would  not  obey,  however  correct  it  might  be  in 
principle ;  because,  if  not  observed,  Congress  was  power- 


1775.]        THE  FIRST  ISSUE  OF  CONTINENTAL  MONEY. 


less  to  enforce  obedience.  Why  tax  the  Colonies  if  they 
would  not  pay  ?  Congress  could  not  enforce  the  collec- 
tion: this  was  the  weakest  point  in  the  structure  of  the  gov- 
ernment, and  which,  unhappily,  could  not  be  strengthened. 

If  the  Colonies  had  been  directly  taxed,  probably  they 
would  have  refused  to  pay,  and  then  denounced  Congress 
for  daring  to  exercise  so  much  power.1  Lieut.-Gov.  Col- 
den  wrote  to  the  Earl  of  Dartmouth,  during  the  debate 
on  this  subject,  "  The  Congress  are  well  aware  that  an 
attempt  to  raise  money  by  an  immediate  assessment  upon 
the  people  would  give  disgust  that  might  ruin  all  their 
measures,  and  therefore  they  prefer  to  do  it  by  issuing 
paper  money."2  The  people  had  rebelled  because  Par- 
liament assumed  the  right  to  tax  the  Colonies  without 
their  consent;  and  would  they  allow  Congress  to  do 
what  they  had  denied  to  Parliament  ?  This  was  to  con- 
tradict the  very  idea  of  resistance.  Whatever  might 
have  been  the  opinion  of  Congress  in  respect  to  direct 
taxation,  the  inexpediency  of  resorting  to  such  a  meas- 
ure was  manifest;  and  any  enactment  involving  the 
right  would  have  been  disobeyed,  and  treated  with 
contempt.  Having  recommended  the  Colonies  to  pay 
their  respective  quotas  of  the  sum  required  to  redeem 

1  Noah  Webster  says,  "  The  advantages  the  Colonies  had  derived 
from  bills  of  credit,  under  the  British  Government,  suggested  to  Con- 
gress, in  1775,  the  idea  of  issuing  bills  for  the  purpose  of  carrying  on 
the  war.  And  this  was  perhaps  their  only  expedient.  Money  could 
not  be  raised  by  taxation;  it  could  not  be  borrowed."  —  Sketches  of 
the  late  Revolution,  written  in  the  years  1787,  and  '89,  Coll.  of 
Essays,  p.  191. 

2  June  7,  1775,  Documents  relating  to  the  Col.  Hist,  of  New  York, 
vol.  viii.  p.  579. 


36 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775. 


the  bills,  Congress  went  to  the  verge  of  safety.  To 
have  attempted  to  go  further  might  have  caused  the 
speedy  and  inglorious  end  of  that  body. 

Congress,  it  has  been  said,  ought  never  to  have  issued 
bills  of  credit,  but  provided  funds  in  some  other  way. 
Whether  a  loan  could  have  been  obtained  when  Conti- 
nental bills  were  first  issued,  it  is  impossible  definitely 
to  ascertain ;  but  surely  the  credit  of  Congress  must 
have  been  very  poor,  as  the  organization  was  only  a 
few  days  old,  while  many  regarded  the  future  with  uncer- 
tainty and  alarm.  "What  if  Congress  were  unsuccessful 
in  the  demands  made  of  Great  Britain,  and  were  pro- 
hibited from  redeeming  the  obligations  incurred  ?  Would 
any  one  trust  the  government  under  such  circumstances  ? 1 

Nevertheless,  Dr.  Franklin  urged  Congress  to  resort  to 
loans,  instead  of  issuing  any  more  paper  money,  when 
the  question  of  a  second  issue  arose,  —  a  fact  indicating 
the  practicability,  in  his  opinion,  of  raising  money  at 
that  time  by  borrowing.  Whether  the  country  would 
have  loaned  funds  to  any  extent  or  not,  no  one  will 
question  the  wisdom  of  such  a  policy,  had  it  been  prac- 
ticable. 

From  all  that  can  be  learned  about  public  sentiment 
during  this  period,  it  is  probable  that  Congress  issued 

1  Many  believed  the  issue  of  paper  money  to  be  a  necessity,  and 
justified  the  act  on  that  ground.  John  Adams  wrote  to  Mrs.  Warren, 
"  A  paper  currency,  fluctuating  in  its  value,  will  ever  produce  appear- 
ances in  the  political,  commercial,  and  even  the  moral  world,  that  are 
very  shocking  at  first  sight;  but,  upon  examination,  they  will  not  be 
found  to  proceed  from  a  total  want  of  principle,  but,  for  the  most  part, 
from  necessity"  (Dec.  15,  1778,  Adams's  Works,  vol.  ix.  p.  475).  Ham- 
ilton entertained  the  same  opinion  ( Works,  vol.  i.  pp.  118,  119). 


1775.]        THE  FIRST  ISSUE  OF  CONTINENTAL  MONEY. 


37 


these  bills  in  obedience  to  the  popular  demand,  just  as 
that  body  many  a  time  since  has  enacted  measures,  not 
because  they  were  right,  but  for  the  sake  of  pleasing 
the  people.  It  must  be  remembered,  however,  that,  in 
those  days,  Congress  was  obliged  to  follow  public  senti- 
ment closely  in  order  to  exist:  now  Congress  can  fall 
back  upon  the  Constitution  in  defence  of  the  measures 
adopted.  The  people,  as  we  have  observed,  had  tried 
paper  money  in  all  the  Colonies,  and  knew  its  virtues, 
as  well  as  its  defects ;  and  they  believed  it  was  the  best 
mode  of  raising  funds  to  carry  on  the  government. 
These  were  sorely  needed  to  purchase  supplies  for  the 
army:  the  Colonies  "had  stretched  their  own  public 
faith  as  far  as  it  would  go  ; " 1  yet  they  had  faith  in  a 
currency  issued  by  Congress  upon  pledge  of  payment  by 
all  the  Colonies,  and  circulating  in  all  of  them.  The 
paper  currencies  then  existing  were  local,  and  many  and 
grievous  were  the  complaints  arising  from  their  use. 
These,  it  was  believed,  would  not  occur  if  bills  of  credit 
were  issued  by  Congress.  Such  was  the  way  the  people 
reasoned ;  and  nothing  except  paper  money  would  satisfy 
them.2     "Their  representations,"  says  Phillips,  "seem 

1  From  letter  of  New- York  Provincial  Congress  to  delegates  repre- 
senting that  Colony  in  Continental  Congress,  Am.  Archives,  fourth 
series,  vol.  ii.  p.  1281. 

a  When  Congress  determined  to  strike  the  first  bills,  the  whole  coun- 
try acquiesced.  In  an  address  to  that  body  by  the  inhabitants  of  Phila- 
delphia, early  in  1780,  it  was  said,  "That  whereas,  at  the  commencement 
of  the  present  Avar,  the  country  being  then  destitute  of  the  proper  forms 
and  powers  of  government,  there  appeared  no  other  method,  sufficiently 
expeditious  and  practicable,  for  raising  the  current  supplies,  than  by 
striking  money  by  this  honorable  house,  in  such  portions  and  at  such 


38  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775. 

at  last  to  have  wrought  on  Congress  a  knowledge  that 
their  constituency,  whether  for  well  or  ill,  desired  a 
Continental  paper  currency  which  should  be  equally  cur- 
rent in  all  the  Colonies."  1  On  the  17th  of  June,  Duane,2 
a  delegate  from  New  York,  wrote  to  his  constituents, 
"Your  great  complaint  of  the  want  of  money  will,  I 
hope,  be  soon  removed.  For  your  present  satisfaction, 
we  have  obtained  leave  of  the  Congress  to  inform  you 
that  the  general  committee  of  the  whole  body  have  re- 
ported a  resolution  to  emit,  in  Continental  paper  cur- 
rency, a  sum  not  exceeding  the  value  of  two  millions 
of  Spanish  dollars,  for  the  redemption  of  which  all  the 
Colonies  are  to  be  pledged."  Within  a  week  the  recom- 
mendation of  the  committee  was  adopted. 

It  is  not  fair  to  impute  all  the  blame  for  enacting  this 
measure  to  the  people,  because  it  is  very  probable  that 
many  of  the  delegates  were  sincere  advocates  of  it. 
During  one  of  the  debates  on  this  subject,  a  member 
Tose,  and  said,  "Do  you  think,  gentlemen,  that  I  will 
consent  to  load  my  constituents  with  taxes,  when  we  can 
send  to  our  printer,  and  get  a  wagon-load  of  money,  one 
quire  of  which  will  pay  for  the  whole  ?  " 3  The  conclusion 
that  may  be  fairly  drawn  is,  the  people  wanted  paper 
money,  and  Congress  could  not  have  done  otherwise  than 
it  did,  in  satisfying  this  desire.  It  was  necessary  for 
Congress  to  obey  the  people,  in  order  to  exist. 

periods  as  to  them  should  seem  meet  and  proper.  The  necessity  gave 
countenance  to  the  proceeding,  and,  convinced  thereof,  the  whole 
country  unanimously  acquiesced."  —  Almon's  Bemcmb.,  1780,  p.  301. 

1  Cont.  Paper  Money,  p.  24. 

2  Am.  Archives,  fourth  series,  vol.  ii.  p.  1016. 
8  Webster,  Folitical  Essays,  p.  7,  note  d. 


1775.]        THE  FIRST  ISSUE  OF  CONTINENTAL  MONEY. 


39 


A  month  elapsed  before  any  measures  were  taken  for 
printing  the  bills.  Finally,  on  the  21st  of  July,  a  com- 
mittee were  appointed  for  this  purpose.  Finding  the 
amount  authorized  insufficient  to  supply  the  demands 
made  upon  Congress,  four  days  later  that  body  issued  an 
additional  million.  Franklin  opposed  this  measure,  for 
he  declared,  in  a  letter  to  a  friend,  "After  the  first 
emission  I  proposed  that  we  should  stop,  strike  no  more, 
but  borrow  on  interest  those  we  had  issued.  This  was 
not  then  approved  of,  and  more  bills  were  issued." 1 

As  the  signing  of  so  large  a  number  of  bills  consumed 
more  time  than  the  committee  appointed  for  that  purpose 
could  give  to  the  business,  another  committee  were  raised, 
composed  of  persons  residing  in  Philadelphia,  two  of 
whom  were  required  to  number  and  sign  each  bill,  and 
deliver  them  to  Michael  Hilligas  and  George  Clymer, 
joint  treasurers  of  the  Colonies.2  The  notes  are  fine 
specimens  of  the  progress  to  which  the  art  of  engraving 
had  attained  in  the  country  at  that  period. 

Congress  supposed  that  each  Colony  would  provide 
ways  and  means  for  sinking  its  proportion  of  the  bills,  in 
the  manner  most  effectual,  and  best  adapted  to  the  con- 
dition, circumstances,  and  equal  mode  of  levying  taxes 
therein.3  An  assessment  also  was  prepared,  based  upon 
the  supposed  population  of  the  Colonies,  including  the 
negroes  and  mulattoes,  which  was  to  be  revised  as  soon 
as  the  correct  list  of  each  Colony  could  be  obtained.  As 
Georgia  had  not  yet  linked  her  fortunes  with  those  of  the 
other  Colonies,  the  sums  assigned  to  each  Colony  were 
the  following:  — 

1  Sparks' s  Franklin,  vol.  viii.  p.  328.       2  July  25.      8  July  29. 


40 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775. 


Rhode  Island 
Connecticut  . 
New  York 
New  Jersey  . 
Pennsylvania 


New  Hampshire 
Massachusetts  Bay 


.  248,139 

.  248,139 

.  161,290| 

.  372,2081 


.  $124,069^ 
.  434,244 


71,9591 


Delaware  .  . 
Maryland .  . 
Virginia  .  . 
North  Carolina 
South  Carolina 


37,219i 
310,1741 
496,278 
248,139 
248,139 


$3,000,000 


Each  Colony  was  to  pay  its  respective  quota  in  four 
equal  payments  annually,  commencing  with  the  last  day 
of  November,  1779.1  One  of  the  links  in  the  system 
was  for  the  several  Colonies  to  levy  and  collect  taxes, 
which  were  to  be  applied  in  sinking  the  bills.  When 
these  were  received  by  the  collectors,  they  were  to  send 
them  to  the  Continental  treasurers;  and  in  case  they 
could  not  secure  their  quota,  either  directly  in  the  way 
of  receiving  the  bills  for  taxes,  or  by  exchange  of  Colo- 
nial notes  for  them,  the  deficiency  was  to  be  made  up  in 
silver  or  gold.  The  treasurers  appointed  by  the  Colonies, 
before  sending  their  bills  to  Philadelphia,  were  to  "  take 
care  to  cut,  by  a  circular  punch  of  an  inch  in  diameter, 
a  hole  in  each  bill,  and  to  cross  the  same,  thereby  to 
render  them  unpassable,  though  the  sum  or  value  is  to 

1  The  Colonies  promptly  responded  to  the  recommendation  of  Con- 
gress. The  Provincial  Congress  for  the  Colony  of  New  York,  on  the 
24th  of  May,  "Resolved,  That  this  Congress  will,  before  they  rise,  pro- 
vide the  best  ways  and  means  in  their  power,  as  representatives  of  the 
people,  for  the  discharge  of  such  money,  as  is  now  lent,  or  shall  be 
subscribed  or  otherwise  advanced  or  supplied,  on  the  public  faith,  to 
defray  the  charges  that  are  or  shall  be  incurred  in  the  present  exigences 
of  11  i<i  Colony,  or  that  shall  hereafter  be  expended  or  incurred  by 
recommendation  of  the  Continental  or  this  Provincial  Congress."  The 
other  Colonies  passed  similar  resolutions. 


1775.]        THE  FIRST  ISSUE  OF  CONTINENTAL  MONEY.  41 

remain  fairly  legible."  As  fast  as  the  bills  were  received, 
they  were  to  be  destroyed  by  a  committee  appointed  for 
that  purpose ;  and  the  silver  and  gold  sent  to  make  up 
deficiencies  in  quotas  were  to  be  retained  until  demanded 
in  redemption  of  Continental  bills.  The  act  further 
provided,  that,  whenever  the  treasurers  had  gold  or  silver 
in  their  possession  for  the  redemption  of  Continental 
bills,  they  should  "advertise  the  same,  signifying  that 
they  were  ready  to  give  silver  or  gold  for  such  bills  to  all 
persons  requiring  it  in  exchange." 

It  may  seem  singular  that  a  people  who  had  been 
trying  to  establish  these  two  great  principles,  no  taxation 
without  representation,  and  representation  based  on  popu- 
lation, should  have  committed  the  palpable  injustice  of 
recommending  a  tax  founded  on  population,  arid  not  on 
property.  Let  no  one,  though,  forget  how  chaotic  was 
the  condition  of  the  country  at  that  time,  or  the  infancy 
of  the  central  government,  which  was  only  half  formed, 
and  without  clearly  defined  powers.  The  Colonial  gov- 
ernments, too,  were  in  the  same  condition  ;  nor  had  any 
estimate  ever  been  made  of  the  wealth  of  the  Colonies. 
It  is  true  none  had  ever  been  formed  of  the  inhabitants ; 
but,  amid  the  confusion  of  the  time,  the  rule  adopted 
was  likely  to  give  rise  to  less  dissatisfaction  than  the 
adoption  of  any  other. 


42 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775. 


CHAPTER  IV. 

ADMINISTRATION  OF  THE  BOARD  OF  TREASURY. 
1775-1777. 

When  the  first  issue  of  paper  money  was  ordered  by 
Congress,  many  confidently  believed  the  debt  thus  created 
would  be  promptly  redeemed  without  loss  to  any  one. 
But  events  not  foreseen  in  the  beginning,  nor  even 
imagined,  prevented  the  fulfilment  of  this  hope.  Eminent 
as  was  the  ability  of  many  of  the  political  leaders  of  the 
American  Revolution,  no  one  among  them  was  endowed 
with  the  Promethean  genius  to  forecast  the  future.  The 
Colonies  were  rapidly  drifting  towards  revolution,  without 
knowing  it  or  the  cost  of  the  movement.  Only  a  few 
days  after  the  first  emission  of  bills  of  credit,  the  battle 
of  Breed's  Hill  was  fought ;  and  gradually  the  hope  of  a 
cheap  and  peaceful  solution  of  the  grievance  with  Great 
Britain  faded  away. 

Small  as  was  the  amount  of  bills  authorized,  two 
months  after  their  authorization  not  enough  had  been 
signed  to  answer  the  urgent  calls  upon  the  treasury.1 
The  signers  neglected  or  refused  to  attend  to  their  duties  ; 
and  the  bills  did  not  come  into  general  circulation  before 
the  middle  of  August,  and  even  then  in  no  great  quantity. 
Indeed,  so  negligent  were  the  signers  of  their  duty,  that 

1  Am.  Archives,  fourth  series,  vol.  iii.  p.  11. 


1775.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  43 

Congress,  on  the  10th  of  November,  directed  the  delegates 
to  call  upon  those  who  had  been  appointed  to  sign  the 
bills,  and  request  them  to  complete  their  task  without  fur- 
ther delay.  Of  course,  such  slight  aid  could  not  go  far 
towards  supplying  the  needs  of  Congress  and  the  Colo- 
nies. Consequently,  on  the  25th  of  July  another  million 
was  authorized,  and,  before  the  year  closed,  it  was 
resolved  to  issue  three  millions  more  of  paper  money. 
This  measure  was  strenuously  opposed  by  Dr.  Franklin,1 
who  advocated  borrowing  the  bills  already  issued  upon 
interest.  This  plan  he  had  favored  when  the  preceding 
issue  was  under  consideration ;  but  his  protest  on  both 
occasions  proved  unavailing,  and  so  the  third  issue  came 
forth  printed  from  the  same  plates,  and  under  similar 
superintendence,  as  the  former  issues. 

Congress  was  not  unmindful  of  the  necessity  of  pro- 
viding a  way  for  redeeming  these  obligations.  Accord- 
ingly, each  Colony  was  once  more  directed  "  to  provide 
ways  and  means  for  sinking  its  proportion  of  bills  in  the 
most  effective  manner,  and  best  adapted  to  the  condition 
and  equal  mode  of  levying  taxes  in  each  Colony/' 2  Con- 
gress also  directed  that  each  Colony  should  pay  its  pro- 
portion of  the  bills,  determined  by  the  number  of  its 
inhabitants,  in  four  equal  amounts,  beginning  the  last  day 
of  November,  1783,  a  year  after  the  redemption  of  the 
issues  ordered  at  the  last  session  of  Congress,  and  ending 
three  years  later.  The  other  features  of  the  previous 
resolve,  relating  to  the  redemption,  exchange,  and  destruc- 
tion of  bills,  were  re-enacted.    The  year,  therefore,  closed 

1  Letter  to  Samuel  Cooper,  Sparks' s  Franklin,  vol.  viii.  p.  328. 

2  Dec.  26. 


44  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1776. 


with  six  millions  of  paper  money  either  afloat  or  soon  to 
be  put  in  circulation. 

Early  the  next  year,1  ten  thousand  dollars  were  struck 
for  the  purpose  of  exchanging  ragged  and  torn  bills. 
Every  day,  however,  the  pressure  grew  stronger  for 
another  issue  of  paper  money.  The  Colonies  and  Conti- 
nental armies  were  without  funds,  and  the  only  resource 
seemed  to  be  that  of  the  printing-press :  consequently,  on 
the  17th  of  February,  1776,  a  fourth  issue  of  four  millions 
was  ordered.  To  give  the  bills  more  currency,  and  to 
assist  the  people  with  small  change  in  place  of  silver, 
which  had  been  withdrawn  from  circulation,  a  little  more 
than  one-half  of  the  issue  was  struck  in  fractional  bills  of 
one-sixth,  one-third,  one-half,  and  two-thirds  of  a  dollar.2 

Before  the  fifth  issue  appeared,  Continental  bills  had 
begun  to  depreciate ;  and  every  one  must  have  seen  the 
inevitable  consequence  of  increasing  the  quantity.3  But 
no  other  expedient  could  be  devised.  The  States  (for 
independence  was  now  declared)  were  not  accustomed  to 
taxation :  the  General  Government  was  weak,  and  with- 
out credit ;  nevertheless,  every  eye  was  turned  toward  it 
for  aid. 

The  singular  spectacle  was  presented  of  the  retention 
i  Jan.  5.  2  Feb.  21. 

8  Numerous  false  reports  were  circulated  in  those  days,  for  the  pur- 
pose of  impairing  the  credit  and  power  of  the  Confederation.  The  fol- 
lowing is  a  fair  illustration :  *' A  report  prevails  here  that  the  Congress 
is  separated  and  that  Dr.  Franklin  and  six  more  are  gone  to  France  or 
some  other  place  to  secure  their  dollars,  for  they  have  got  most  of  the 
cash  of  the  country  into  their  hands,  you  may  guess  for  what  purpose." 
—  Letter  from  New  York,  Nov.  5, 1770,  addressed  to  a  gentleman  in  Biis- 
tol,  Eivj. 


1776.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  45 


of  nearly  all  the  power  by  the  States,  and  of  a  refusal 
on  their  part  to  exercise  it,  preferring  to  trust  a  weak  and 
inefficient  General  Government  rather  than  to  rely  upon 
stronger  local  organizations.  The  depreciation  of  Conti- 
nental money  ought  to  have  taught  Congress  the  plainest 
lessons  concerning  the  inevitable  effect  of  authorizing  new 
issues;  yet  the  lesson  was  imperfectly  heeded,  and  the 
quantity  was  increased  five  millions  more.1 

Fifteen  millions  were  now  authorized.  The  deprecia- 
tion was  too  patent  to  be  ignored.  Money  was  needed 
by  the  States  and  by  the  army,  and  the  calls  upon  Con- 
gress were  incessant.  Seeing  the  evils  attending  the  issue 
of  paper  money,  Congress  determined  upon  other  meas- 
ures for  relief. 

A  loan  was  proposed.  In  those  days  this  was  not  a 
common  practice  among  nations,2  and  serious  opposition 
arose  to  the  measure.3  But  the  principal  dispute  in 
Congress  related  to  the  rate  of  interest.  Congress  pro- 
posed to  fix  it  at  four  per  cent,  —  a  rate  too  low  to  tempt 
the  lenders  of  money  to  subscribe.  This  rate,  however, 
was  established;  and  five  millions  of  Continental  dollars 
were  to  be  immediately  borrowed,  the  United  States 
pledging  their  faith  to  the  lenders  for  the  repayment  of 
the  same  with  interest.4  The  following  was  the  form  of 
certificate  issued :  — 

1  July  22. 

2  Carthage  was  the  most  advanced  of  all  the  states  of  antiquity  in 
respect  to  finance,  and  perhaps  was  the  first  nation  to  make  a  foreign 
state  loan  (see  Mommsex's  Hist,  of  Rome,  vol.  ii.  p.  29,  Am.  ed.).  For 
history  of  early  state  loans  in  Greece,  see  Boeckh's  Public  Economy  of 
the  Athenians,  pp.  760-763. 

8  Webster,  Political  Essays,  p.  18.  4  Oct.  3. 


46  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1776. 


The  United  States  of  America  acknowledge  the  receipt  of 
dollars  from  ,  which  they  promise  to  pay  to 

the  said  ,  or  bearer,  on  the  day  of  , 

with  interest  annually,  at  the  rate  of  four  per  cent  per  annum, 
agreeable  to  a  resolution  of  the  United  States,  passed  the  third 
day  of  October,  1776.    Witness  the  hand  of  the  Treasurer,  this 
day  of  ,  A.  D. 

This  certificate  was  countersigned  by  a  loan-office  com- 
missioner, Congress  having  authorized  the  appointment 
of  one  by  every  State,  who  was  responsible  to  the  ap- 
pointing power  for  the  rightful  discharge  of  his  duties. 
No  certificate  was  to  be  given  for  less  than  three  hun- 
dred dollars,  and  the  money  thus  borrowed  was  to  be 
repaid  at  the  expiration  of  three  years.  The  commis- 
sioners were  paid  a  commission  of  one-eighth  of  one  per 
cent  upon  all  loans  made  for  the  benefit  of  the  govern- 
ment.1 The  resolutions  were  published  by  order  of  Con- 
gress, and  the  States  were  directed  to  send  to  the 
Committee  of  the  Treasury  the  names  of  the  commis- 
sioners as  soon  as  they  were  appointed. 

This  scheme  for  raising  money  did  not  succeed  (nor 
were  those  disappointed  who  opposed  it),  because  so  low 
a  rate  of  interest  was  offered.  It  was  the  hope  of  many 
that  a  considerable  sum  of  money  might  be  raised  in  this 
way;  but  lenders  could  not  see  the  wisdom  of  loaning 
to  the  government  their  money  at  four  per  cent  on  its 
well-meant  but  insecure  pledge,  when  they  could  get  six 
per  cent  from  private  borrowers  with  ample  security.  Is 

1  Sept.  29,  1778,  the  rate  of  compensation  was  changed,  and  the  com- 
missioners were  allowed  two  per  cent  on  the  amount  of  interest  paid  for 
transacting  the  business. 


1777.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  47 

it  not  plain,  then,  why  the  government  failed  in  such  a 
competition  for  money? 

Now  and  then  patriotism  rose  above  profits,  or  even 
security,  and  some  person  would  repair  to  a  loan-office, 
and  subscribe  to  the  national  loan;  but  either  because 
those  patriots  were  so  few  in  number,  or  because  they 
subscribed  for  such  small  amounts,  the  government  was 
not  materially  aided  with  funds  flowing  from  this 
source. 

In  the  early  part  of  February,  1777,  John  Adams1 
wrote  to  his  friend  Warren  of  Boston,  that  four  per 
cent  interest  "  was  not  an  equitable  allowance ; "  by 
which  he  meant  that  it  was  "  not  so  much  as  the  use 
of  the  money  is  honestly  worth  in  the  ordinary  course 
of  business,  upon  an  average  for  a  year ;  and  I  have 
accordingly  exerted  all  the  little  faculties  I  had  in  en- 
deavoring to  raise  the  interest  to  six  per  cent."  Con- 
tinuing his  letter,  he  declared  that  he  trembled  for  the 
consequences  of  this  determination  of  Congress.  "If 
the  loan  officers  should  not  procure  us  money,  we  must 
emit  more,  which  will  depreciate  all  which  is  already 
abroad,  and  so  raise  the  price  of  provisions  and  all  the 
necessaries  of  life,  that  the  additional  expense  to  the 
Continent  for  supplying  their  army  and  navy  will  be 
vastly  more  than  the  two  per  cent  in  dispute,  besides 
all  the  injustice,  chicanery,  extortion,  oppression,  and 
discontent  which  is  always  occasioned  everywhere  by  a 
depreciating  medium  of  trade.  I  am  much  afraid  of 
another  mischief.  I  fear  that  for  want  of  wisdom  to 
raise  the  interest  in  season,  we  shall  be  necessitated, 


1  Works,  vol.  ix.  p.  452. 


48         FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1776. 


within  a  few  months,  to  give  eight  or  ten  per  cent,  and 
not  obtain  the  money  we  want  after  all."  He  then  very 
quaintly  adds,  "  I  have  been  so  often  a  witness  of  the 
miseries  of  this  after-wisdom  that  I  am  wearied  to  death 
of  it."  Before  the  letter  was  sent,  the  decision  of  Con- 
gress was  wisely  reconsidered ;  and  Adams  had  the  pleas- 
ure of  writing  a  postscript,  dated  a  month  later,  that, 
after  many  days  of  deliberation,  the  rate  of  interest  had 
been  raised  to  six  per  cent. 

As  not  enough  money  flowed  into  the  treasury  from 
this  source  to  meet  the  demands  upon  the  government, 
another  experiment  was  attempted,  which  was  a  familiar 
method  of  raising  money  at  that  period,  though  long  ago 
condemned  by  law  and  public  opinion.1    This  new  scheme 

1  The  lottery  had  been  in  existence  in  England  two  hundred  years ; 
for  in  1569  one  was  formed  (perhaps  the  first)  in  which  forty  thousand 
chances  were  sold  at  ten  shillings  each,  the  prizes  consisting  of  articles 
of  plate,  and  the  profits  were  employed  in  repairing  certain  harbors. 
In  1694  a  loan  of  a  million  pounds  was  raised  by  the  sale  of  lottery- 
tickets  at  ten  pounds  per  ticket,  the  prizes  in  which  were  funded  at 
the  rate  of  fourteen  per  cent  for  sixteen  years.  Half  a  century  later, 
in  1746,  a  loan  of  three  million  pounds  was  raised  on  four-per-cent 
annuities  and  a  lottery  of  fifty  thousand  tickets  of  ten  pounds  each; 
and,  in  the  following  year,  a  million  pounds  was  issued  by  the  sale  of 
a  hundred  thousand  tickets,  the  prizes  in  which  were  funded  in 
perpetual  annuities  at  the  rate  of  four  per  cent  per  annum.  Thirty 
years  afterward,  in  August,  1776,  Great  Britain  sought  to  raise  six 
hundred  thousand  pounds  by  lottery  to  carry  on  the  war  with  America. 
The  last  lottery  of  the  kind  which  occurred  there  was  in  1780,  when 
every  subscriber  of  a  thousand  pounds  toward  a  loan  of  twelve  million 
pounds  at  four  per  cent  received  a  bonus  of  four  lottery-tickets,  the 
intrinsic  value  of  each  of  which  was  ten  pounds.  In  France,  lotteries 
bad  been  often  tried  by  the  government  in  order  to  raise  money  for 
public  purposes ;  and  in  1779  one  was  formed  to  raise  a  fund  of  thirty- 


1776.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  49 


was  a  lottery,  which  had  been  often  tried  in  the  Colonies, 
as  well  as  in  the  Old  World,  both  for  public  and  private 
purposes.  Many  a  church  still  stands  in  New  England 
built  with  funds  raised  in  this  manner. 

The  Board  of  Treasury  reported  a  plan  on  the  1st  of 
November,  and  subsequently  all  the  details  were  added. 
It  was  resolved  that  the  lottery  should  consist  of  one  hun- 
dred thousand  tickets :  each  ticket  was  divided  into  four 
billets  of  ten,  twenty,  thirty,  and  forty  dollars  respec- 
tively, which  were  to  be  drawn  in  four  classes.  Phillips 
says  it  was  estimated  that  one  million  five  thousand  dol- 
lars would  be  drawn  into  the  Continental  Treasury  in 
this  way,  though  he  has  omitted  to  give  any  authority 
for  the  statement.  The  tickets  were  to  be  sold  for  ready 
money,  which  Breck  construed  to  mean  specie  ;  and  some 
of  "  the  fortunate  adventurers,"  as  the  resolution  terms 
them,  were  to  receive,  at  their  option,  "  a  treasury  bank- 
note," or  certificate  payable  in  five  years  with  interest 
at  four  per  cent ;  while  others  were  to  receive  their  money 
from  the  loan-office  commissioner  of  the  States  where  the 
drawers  resided.1 

While  Congress  was  discussing  this  scheme,  the  need 
of  money  was  so  great,  that  the  Board  of  Treasury  were 
directed  to  prepare  materials  for  a  new  emission  of  five 
millions,  one-tenth  of  which  was  to  be  issued  immediately 

six  million'  livres,  which  sum  was  to  be  employed  in  continuing  the 
war  against  Great  Britain.  With  such  well-known  examples,  there 
was  no  ground  for  hesitation  on  the  part  of  Congress  in  respect  to  the 
propriety  or  expediency  of  the  measure.  The  condemnation  of  lotteries 
on  moral  grounds  is  the  result  of  a  later  and  deeper  investigation  of 
moral  principles. 
1  Nov.  1,  18,  19. 


50  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1777. 

in  small  bills  of  two-thirds,  one-third,  one-sixth,  and  one- 
ninth  of  a  dollar;  nor  was  the  issuing  of  the  balance 
long  delayed.1  Phillips2  affirms  that  no  vestiges  of 
these  notes  remain,  and  that  persons  throughout  the 
country  who  have  made  investigation  about  them  can 
obtain  no  information  concerning  them.  They  have 
never  appeared  in  any  list  of  the  various  issues  of  paper 
money ;  and  Phillips  is  probably  correct  in  saying,  that, 
for  some  reason  unknown,  they  were  never  sent  into 
circulation.  As  the  amount  was  very  small  (only  five 
hundred  thousand  dollars),  perhaps  the  Board  of  Treasury 
did  not  regard  the  relief  which  would  thus  be  furnished 
of  enough  account  to  justify  them  in  getting  the  mate- 
rials, and  making  the  issue.  From  no  source  could  Con- 
gress obtain  funds,  though  never  were  they  more  greatly 
needed. 

On  the  14th  of  January  it  was  resolved  to  borrow 
two  million  dollars  more  from  the  loan-offices ;  and  the 
commissioners  were  directed  to  receive  bills  of  credit 
emitted  by  the  States,  and  use  them  in  paying  the  gov- 
ernment. How  much  had  been  subscribed  to  the  pre- 
vious loan  cannot  be  ascertained :  in  some  measure, 
however,  it  had  been  successful,  else  the  experiment 
upon  similar  conditions  would  not  have  been  repeated. 

Happily,  the  loan-office  and  lottery  experiments  did 
not  exhaust  the  fertile  mind  of  Congress.  The  Legisla- 
tures of  the  several  States  were  asked  to  raise  by  taxa- 
tion in  the  course  of  the  year,  and  remit  to  the  treasury, 
so  much  as  they  thought  proper,  considering  the  present 
condition  of  their  inhabitants.3    These  sums  were  to  be 


i  Nov.  2,  Dec.  28,  1776.      a  Oont.  Paper  Money,  p.  57.      8  Jan.  14. 


1777.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  51 

placed  to  their  credit,  and  reckoned  in  the  settlement  of 
expenses  for  which  the  States  were  severally  holden. 
Probably  it  was  the  injustice  of  assigning  a  sum  to  be 
raised  by  each  State  in  proportion  to  its  inhabitants 
which  led  to  this  new  method  of  getting  money  from 
them.  The  plan  was  free  from  the  criticism  pronounced 
upon  the  mode  first  adopted  for  paying  Continental  notes, 
of  basing  the  quotas  upon  the  erroneous  principle  of 
population  rather  than  property.  The  weakness  of  this 
last  measure,  however,  was  apparent;  for  only  the  most 
sanguine  could  hope  for  a  favorable  response  from  the 
States.  But  what  more  could  Congress  do  ?  Having 
no  stronger  prerogative  than  to  recommend  and  request 
the  States  to  pay  money  into  the  treasury,  Congress 
could  not  enforce  compliance  with  any  requisition  for  a 
single  dollar. 

The  Continental  treasurer,  also,  was  directed  to  borrow 
money  'on  loan-office  certificates  countersigned  by  the 
auditor-general.1  In  conducting  this  business  he  was  to 
proceed  in  the  same  way  as  the  loan-office  commissioners : 
indeed,  the  loan-office  system  was  simply  extended  so  as 
to  include  the  Continental  treasurer  among  the  number 
of  those  authorized  to  borrow  money  for  the  use  of  the 
government. 

Thus,  within  a  very  short  time,  four  schemes  had  been 
launched  for  raising  money  to  carry  on  the  government, 
—  the  issue  of  Continental  notes  to  be  discharged  by  the 
States,  loans  to  the  government  by  individuals  through 
loan-offices,  a  lottery,  and  advances  of  money  by  the 
several  States.    This  variety  of  methods  was  owing  to 

1  Jan.  15. 


52  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1777. 

the  great  difficulty  of  raising  funds  in  the  ordinary  man- 
ner for  public  uses.  Neither  method  had  succeeded  so 
well  as  that  of  Hippias,  who,  to  obtain  money,  sold  those 
portions  of  the  houses  of  Athens,  which  in  the  upper 
stories,  or  by  doors  opening  outward,  projected  into  the 
public  streets.  The  doubtful  existence  of  the  govern- 
ment, and  its  weakness,  the  poverty  of  the  States,  and 
the  unwillingness  of  the  people  to  submit  to  taxation, 
were  the  leading  obstacles  in  the  way  of  obtaining  funds. 
Unwilling  to  be  taxed  by  Great  Britain  for  the  benefit  of 
the  parent  government,  they  had  come  to  regard  taxation 
with  strong  dislike,  even  when  it  was  a  measure  abso- 
lutely necessary  to  rescue  themselves  from  still  greater 
taxation,  and  evils  far  worse,  if  failing  to  secure 
independence. 

Unable  to  obtain  all  the  funds  needed,  from  these 
several  fountains,  five  million  dollars  upon  the  credit  of 
the  United  States,  of  the  same  denomination  and  on  the 
same  conditions  as  the  last  emission,  were  ordered,1  and 
as  much  more  three  months  afterward.2  As  counterfeit- 
ing the  issues  of  Congress  had  become  an  extremely 
common  practice,  special  pains  were  taken  to  print  the 
bills  in  such  a  manner  as  to  defy  the  art  of  the  counter- 
feiter.   The  following  form  was  employed :  — 

No.  Dollars. 

This  bill  entitles  the  bearer  to  receive  Spanish 
milled  dollars,  or  the  value  thereof  in  gold  or  silver,  according 
to  a  resolution  of  Congress,  passed  at  Philadelphia,  May  20, 
1777. 


i  Feb.  26. 


2  May  20. 


1777.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  53 


They  were  also  ornamented,  and  bore  escutcheons  and 
secret  marks,  devised  by  the  Board  of  Treasury.  Several 
resolutions  were  added  relating  to  the  manner  of  signing, 
striking,  numbering,  and  issuing  the  bills ;  but  these  par- 
ticulars need  not  be  given.1 

Although  the  States  retained  exclusive  authority  to 
raise  money  from  their  members  by  taxation,  they  obtained 
only  small  sums  in  this  way,  and  with  great  difficulty  and 
cost,  while  they  were  continually  calling  upon  Congress 
for  assistance.  Choosing  to  retain  the  power,  the  States 
ought  to  have  accepted  the  responsibility  and  burden;, 
but,  instead  of  doing  this,  they  put  too  much  faith  in  a 
weak,  incapable,  central  government,  and  not  enough  in 
their  own  local  ones.  The  States  furnished  some  aid  to 
the  General  Government ;  but  this  was  fully  reciprocated. 

The  accounts  of  the  States  with  Congress  are  so  inex- 
tricably mixed,  that  it  is  difficult  to  tell  how  much  sup- 
port was  rendered  on  the  one  side  and  the  other  during 
the  early  part  of  the  war.  Georgia  appears  to  have  been 
more  prompt  in  furnishing  assistance  than  any  other 
State.  So  marked,  indeed,  had  been  her  course,  that 
commissioners  were  appointed  to  go  there  and  find  out 
how  much  was  due  from  the  United  States ;  while  Con- 
gress remitted  four  hundred  thousand  dollars  on  account 
of  assistance  thus  rendered,  and  three  hundred  thousand 
dollars  more  for  the  pay  and  subsistence  of  the  Conti- 
nental troops  conducting  operations  in  that  quarter.  As 
this  amount  did  not  then  happen  to  be  in  the  Continental 
treasury,  the  printing-press  was  started,  by  direction  of 
Congress,  to  add  another  million  dollars  to  the  amount 
already  existing.2 

1  May  22.  2  Aug.  15. 


54  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1777. 

As  summer  waned,  the  cause  of  the  Union  grew  des- 
perate. Early  in  September,  President  MeKinley  of  Wil- 
mington was  captured,  and  also  all  the  papers  and  money 
in  the  loan-office  there,  amounting  to  twenty-five  thou- 
sand dollars.  Philadelphia  was  no  longer  tenable,  and 
the  contents  of  the  loan-office  in  that  city  were  removed 
to  East  Town.  On  the  18th  of  the  same  month  Congress 
adjourned  to  Lancaster,  and  on  the  30th  to  Yorktown. 
The  demands  made  upon  Congress  at  this  time  were  more 
numerous  than  ever.  A  mutiny  had  occurred  among 
some  of  the  troops,  owing  to  the  distress  caused  by  paper 
money,  and  from  want  of  the  necessaries  of  life.  Though 
the  flame  was  quickly  subdued,  the  fires  of  discontent 
still  smouldered,  nor  could  they  be  entirely  extinguished. 

The  7th  of  November  marked  a  fresh  issue  of  paper 
money,  to  the  extent  of  one  million  dollars ;  and,  soon 
after,  another  emission  of  the  same  amount  appeared: 
thus  the  year  closed  with  five  emissions  of  paper  money, 
aggregating  thirteen  million  dollars. 


1777.1    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY. 


55 


CHAPTER  V. 

ADMINISTRATION  OF  THE  BOARD  OF  TREASURY. 
1778. 

As  the  year  1777  was  drawing  to  a  close,  articles  of 
confederation  were  formed,  and  passed  by  Congress  for 
ratification  by  the  States,  from  which  the  central  govern- 
ment was  to  derive  larger  as  well  as  more  certain  powers.1 
Notwithstanding  the  necessity  of  this  measure,  like  many 
of  the  needs  of  the  time,  the  work  of  ratification  was 
sadly  delayed. 

Congress  saw  clearly  enough  how  the  issue  of  so  much 
paper  money  without  providing  for  its  redemption  would 
depreciate  its  value  :  indeed,  this  unwelcome  truth  could 
not  be  put  out  of  sight.  It  was  a  matter  of  public  con- 
cern and  alarm.  Congress,  therefore,  appealed  once  more 
to  the  States  for  assistance.  They  were  earnestly  recom- 
mended to  raise  during  the  year  five  million  dollars  by 
taxes  levied  on  the  inhabitants  of  the  various  States  in 
the  following  proportions  : 2  — 


New  Hampshire 

.  $200,000 

$800,000 

Rhode  Island    .  . 

.  100,000 

60,000 

New  York    .    .  . 

.  200,000 

New  Jersey  .    .  . 

270,000 

Pennsylvania    .  . 

.  620,000 

Connecticut  .    .  . 

600,000 

Maryland-    .    .  . 

.  520,000 

Massachusetts  Bay 

820,000 

North  Carolina .  . 

.  250,000 

'  60,000 

South  Carolina  .  . 

.  500,000 

1  Nov. 

15,  1777. 

2  Nov.  22,  1777. 

56  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1777. 

These  sums  were  not  regarded  by  Congress  as  the  true 
proportions  which  the  Colonies  should  advance,  but  only 
approximate  estimates ;  nor  was  it  necessary  to  be  very 
exact  in  distributing  the  amount,  since  the  funds  coming 
from  this  source  were  to  be  considered  a  loan  bearing 

o 

six  per  cent  interest.  At  the  same  time,  the  States  were 
recommended  to  refrain  from  issuing  any  more  bills  of 
credit,  and,  where  the  Continental  circulation  was  suffi- 
cient for  the  wants  of  business  (and  doubtless  it  was 
everywhere),  to  withdraw  their  own  local  issues,  "  and, 
for  the  future,  to  provide  for  the  exigencies  of  war  and 
the  support  of  Government  by  taxes  levied  within  the 
year,  or  such  other  expedient  as  may  produce  a  compe- 
tent supply." 

No  one  will  question  the  wisdom  of  this  recommenda- 
tion; but  it  was  nothing  more,  and  proved  ineffectual. 
Had  Congress  been  clothed  with  power  to  enforce  the 
measure,  how  suddenly  the  financial  prospect  would  have 
changed !  The  loan-office  system  also  was  extended. 
The  States  were  recommended  to  open  offices  in  every 
town  and  district,  under  the  inspection  of  proper  persons 
clothed  with  authority  to  issue  certificates  for  loans  as 
small  as  two  hundred  dollars. 

Soon  another  recommendation  appeared  concerning  the 
property  of  those  who  had  abandoned  their  allegiance  to 
the  States,  and  passed  over  to  the  enemy.  The  property 
of  all  such  persons,  it  was  recommended,  should  be  con- 
fiscated, and  the  proceeds  invested  in  loan-office  certifi- 
cates, which  were  to  be  appropriated  as  the  States  should 
direct.1    The  recommendation  was  heeded,  and  all  the 

i  Nov.  27,  1777. 


17  7?.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  57 


States,1  during  some  period  of  the  war,  passed  acts  to 
confiscate  and  sell  the  property  of  loyalists,  applying 
the  avails  in  redeeming  certificates  and  bills  of  credit, 
or  paying  other  expenses  resulting  from  the  conflict  with 
Great  Britain.  The  debtors,  also,  of  British  creditors, 
were  enabled  to  discharge  their  debts  by  paying  into 
the  State  treasuries  or  loan-offices  paper  money  in  fulfil- 
ment of  their  obligations.  Under  some  of  these  laws, 
many  individuals  were  attainted  by  name;  others  were 
banished  forever  from  the  country,  and,  if  found  within 
the  State,  were  declared  felons  without  benefit  of  clergy. 
In  some  States  the  estates  and  rights  of  married  women, 
of  widows  and  minors,  and  of  persons  who  had  died 
within  the  territories  possessed  by  the  British,  were 
forfeited.  In  New  York  the  Courts  were  enjoined  to 
prefer  bills  of  indictment  against  persons,  alive  or  dead, 
who  had  adhered  to  the  king,  or  joined  his  fleets  or 
armies,  and  who  were  the  owners  or  claimants  of  prop- 
erty. In  some  States  confiscated  property  was  applied 
to  other  than  war  purposes;  in  others,  as  rewards  to 
persons  for  military  service.  In  one  instance  the  prop- 
erty which  had  been  mortgaged  to  a  British  creditor 
was  released,  by  special  act  of  the  Legislature,  from 
the  encumbrances,  and  given  to  the  representatives  of 
the  mortgagee,  who  had  fallen  in  battle.2 

1  Charles  Carroll  of  Carrol lton,  and  several  others,  opposed  the  enact- 
ment of  confiscation  laws  by  the  Legislature  of  Maryland.  There  was 
a  warm  debate  on  the  subject,  but  the  law  was  passed. — Md.  Gazette. 
See  Almon's  Rememb.,  1780,  part  ii.  p.  172. 

2  See  correspondence  between  Hammond,  British  minister,  and 
Jefferson,  Secretary  of  State,  Am.  State  Papers,  vol.  i.  p.  192,  Boston, 
1815;  also  elaborate  account  in  Secret  Journal  of  Congress,  October, 
1786,  vol.  iv.  pp.  185-287. 


58 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1777. 


The  right  to  confiscate  the  property  of  loyalists  was 
not  questioned  at  the  time  the  States  seized  it ;  but  when 
the  war  closed,  and  the  terms  of  peace  were  under  dis- 
cussion, the  commissioners  on  the  part  of  Great  Britain 
proposed  a  restitution  of  all  the  property  confiscated. 
The  answer  made  by  the  American  commissioners  was, 
that  they  had  no  power  from  the  various  States  to  restore 
it ;  and,  if  they  had,  it  would  be  just  for  them  to  insist 
upon  compensation  for  the  desolation  wrought  by  the 
British  forces  on  the  towns,  private  houses,  and  property 
of  American  citizens,  contrary  to  the  rules  of  war,  an 
account  of  which  had  been  taken  by  order  of  Congress. 
This  rejoinder  was  so  complete,  that  it  was  agreed  no 
actual  stipulation  should  be  made  for  the  restitution  of 
the  confiscated  property.  The  States,  as  they  pleased, 
were  to  restore  or  keep  the  property  thus  taken  as  a 
satisfaction  for  the  loss  incurred  by  the  ravages  of  the 
British  armies ;  though  the  American  commissioners 
promised  that  Congress  should  recommend  the  States  to 
restore  it. 

The  States,  however,  did  not  consider  favorably  the 
recommendation  of  Congress.  New  York  could  discover 
no  reason  for  restoring  property  which  had  been  confis- 
cated or  forfeited,  as  no  compensation  had  been  offered 
on  the  part  of  Great  Britain  for  the  damages  sustained 
by  the  States  and  their  citizens  from  British  military 
ravages.  The  other  States  saw  the  matter  in  the  same 
light.  An  English  writer1  in  1783,  the  year  peace  was 
made,  in  commenting  upon  this  part  of  the  settlement, 
remarks,  "The  amount  of  the  sum  claimed  by  the  United 

1  The  Case  and  Claims  of  American  Loyalists,  p.  135. 


1778.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  59 


States  for  the  damages  done  by  the  British  forces  far 
surpassed  that  now  claimed  by  the  loyalists.  And,  as 
Great  Britain  must  have  paid  for  those  damages,  or  have 
continued  the  war,  had  she  not  given  up  the  property 
confiscated,  it  is  evident  that  she  had  disposed  of  it  for 
more  than  an  adequate  consideration,  and  is  a  considera- 
ble gainer  by  the  bargain."  This  was  a  not  altogether 
cheerless  view  to  those  whom  the  writer  was  addressing, 
and  doubtless  he  made  his  countrymen  believe,  that,  in 
the  peace  which  Great  Britain  had  just  made,  she  had  not 
lost  every  thing.  The  States  having  failed  to  recompense 
the  loyalists  for  the  losses  they  had  sustained,  the  British 
Government  finally  paid  to  them  X3,292,452.1 

Early  in  the  year,  Congress  resolved  to  borrow  ten 
million  dollars  on  the  credit  of  the  United  States,  the 
loan  bearing  interest  at  six  per  cent,  and  loan-office  cer- 
tificates were  to  be  struck  for  that  amount.  Four  months 
later  this  action  was  rescinded.  Not  long  afterward 
came  the  news  of  the  French  alliance.  The  amount  of 
paper  money  then  in  circulation  was  155,500,000. 

While  the  British  occupied  Philadelphia,  there  was 
published  in  "  The  Pennsylvania  Gazette  " 2  a  statement 
of  the  debt  of  the  government,  in  which  appeared  the 
following  items :  — 

1777,  December  31. — To  amount  of  several  emissions  of 
Continental  paper  dollars,  as  appears  by  the  resolves  of  Con- 
gress, and  certificates  from  the  committees  appointed  for  super- 
intending the  press,  etc.,  amounting  in  the  whole  to  115,000,000 
dollars. 

1  Sabine's  American  Loyalists,  vol.  i.  p.  112. 

2  Almon's  Rememb.  for  the  Year  1778  and  Beginning  of  1779,  p.  193. 


60 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 


To  amount  of  twenty  millions  of  paper  dollars,  borrowed 
on  the  credit  of  Congress  in  the  several  United  States,  as 
appears  by  certificates  from  the  loan  offices  erected  for  that 
purpose,  20,000,000  dollars. 

The  interest  on  this  loan  being  fixed  at  six  per  cent  per 
annum,  till  repaid  by  Congress,  these  two  sums  consolidated 
make  a  clear  apparent  Continental  debt  of  one  hundred  and 
thirt}T-five  millions  of  dollars,  which  at  7s.  6d.  per  dollar, 
amounts  to  50,625,000  pounds.    135,000,000  dollars. 

This  statement  was  a  fearful  exaggeration  of  the  truth, 
and,  of  course,  was  prepared  and  made  public  for  the 
purpose  of  depressing  the  spirits  of  the  people  by  show- 
ing the  impossibility  of  ever  liquidating  such  a  vast  load 
of  indebtedness.  The  errors  in  the  statement  were  too 
patent  to  delude  any  one.  The  Continental  paper  in 
circulation  was  not  so  large  by  fifty  millions  as  the 
amount  therein  given,  while  the  indebtedness  of  the 
States  was  heavier  than  represented.  Even  the  English 
periodicals  saw  fallacies  in  the  statement  too  large  and 
numerous  to  be  passed  without  comment. 

When  the  French  alliance  was  formed,  Congress  was 
not  slow  in  applying  to  France  for  aid;  yet  there  were 
a  few  members  opposed  to  this  step,  among  whom  was 
Henry  Laurens  of  South  Carolina.  To  him  the  foun- 
dation for  drawing  bills  did  not  seem  substantial;  the 
practice  was  dangerous;  and  the  measure,  except  for 
things  absolutely  needed  in  carrying  on  the  war,  was  not 
necessary.  The  drawing  of  bills  of  exchange  he  declared 
to  be  essentially  emissions  of  paper  money  upon  the  very 
worst  terms,  aggravated  by  six  per  cent  interest  per 
annum.    It  was  putting  the  debt  already  existing  out  of 


1778.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  61 


sight  for  a  little  time ;  but  he  affirmed  that  it  would  infal- 
libly return  with  accumulated  force.  To  borrow  money 
from  a  foreign  power  was  to  mortgage  our  soil ;  while  the 
boasted  generosity  of  the  King  of  France  in  feeding  us 
lightly,  and  demanding  no  security,  was  liable  to  the 
suspicion  of  being  insidious.1  "  When  the  loan-office  cer- 
tificates," he  continues,  "  are  put  on  a  beneficial  plan,  if 
money  shall  not  be  furnished  in  sums  equal  to  the  public 
exigency,  it  will  be  a  proof  that  past  emissions  are  not 
excessive.  The  demand  for  money,  at  this  time,  is  not 
confined  to  the  capital  towns  and  cities  within  a  small 

1  The  fears  of  Laurens,  that  possibly  America,  by  leaning  too  heavily 
on  France,  might  not  gain  her  independence,  were  not  altogether  with- 
out foundation ;  for  among  other  secret  papers  found  in  the  cabinet  of 
Louis  XVI.,  which  afterwards  saw  the  light  of  print,  was  one  written 
by  Turgot,  entitled  "Reflections  upon  the  manner  in  which  France  and 
Spain  ought  to  regard  the  consequences  of  the  quarrel  between  Great 
Britain  and  her  Colonies,"  in  which  he  declared  the  event  the  "most 
desirable  for  the  interests  of  the  two  crowns,  would  be  the  reduction  of 
the  colonies  again  under  the  yoke  of  England."  His  reasons  for  this 
view  are  very  striking,  and  reveal  at  once  the  worth  of  his  friendship 
for  the  Colonies.  "If  the  colonies  should  not  be  reduced  till  after  the 
ruin  of  all  their  resources,  England  would  lose  the  advantages  which 
she  has  hitherto  drawn  from  them,  not  only  for  the  augmentation  of 
her  commerce  in  time  of  peace,  but  in  the  use  of  their  forces  in  time  of 
war.  If,  on  the  contrary,  the  colonies  should  be  subdued  without  the 
destruction  of  their  wealth  and  their  population,  they  would  preserve 
also  their  courage  and  their  desire  of  independence;  and  England  would 
be  compelled  to  employ  part  of  her  forces,  in  preventing  a  new  revolt." 
To  accomplish  this  end,  the  Colonies  were  to  be  aided  by  France  in 
making  resistance,  until  all  our  resources  were  destroyed,  and  then  we 
were  to  be  left  severely  alone  by  France.  This  assistance  was  not  to 
be  granted  directly,  but  indirectly  through  the  merchants,  and  thus 
save  France  from  becoming  embroiled  in  war  with  Great  Britain.  See 
R.  G.  Harper's  Works,  pp.  103,  104.    Baltimore,  1819. 


62 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 


circle  of  trading  merchants,  but  spread  over  a  surface  of 
1,600  miles  in  length,  and  300  broad ;  nor  is  it  now  the 
practice  to  give  credit  for  one  and  more  years  for  seven- 
eighths  of  the  whole  traffic.  Every  man  is  now  a  money- 
holder,  and  every  article  is  paid  for  in  cash ;  it  is  hence 
obvious  that  an  immense  sum  is  necessary  for  a  complete 
circulation.  No  man  would  be  so  void  of  understanding 
as  to  keep  Continental  bills  idle  and  at  a  risk,  in  his 
desk,  when  he  might,  upon  the  same  security,  improve 
them  at  six  per  cent  per  annum." 1 

Having  shown  the  causes  of  the  sudden  rise  of  prices, 
Laurens  closes  by  affirming  that  borrowing  from  a  foreign 
power  would  not  increase  the  value  of  paper  money: 
such  a  step,  probably,  would  be  the  source  of  extending 
the  depreciation  to  several  years  beyond  the  term  when, 
if  in  debt  only  at  home,  it  might  be  redeemed.  "  Such, 
and  many  other  arguments,"  he  affirms  he  used  upon  the 
occasion ;  but,  when  the  vote  was  taken,  only  four  persons 
were  found  to  agree  with  him :  so,  on  the  19th  of  May, 
bills  of  exchange  were  ordered  to  be  drawn  upon-  the 
commissioners  of  the  United  States  at  Paris,  to  pay 
interest  due  on  the  loan  certificates. 

Congress,  so  Laurens  affirms,  was  at  first  opposed  to 
borrowing  ten  million  dollars,  and  subsequently  defeated 
a  proposition  to  borrow  half  that  amount ;  and  not  until 
the  9th  of  September  was  the  motion  carried  to  draw 
bills  on  the  commissioners,  who  were  then  in  Paris,  at 
the  rate  of  five  livres  of  France  for  a  Spanish  dollar,  for 
the  payment  of  interest  upon  all  money  loaned  to  the 
government  through  the  loan-office  before  the  first  of 

i  Gibbes'  Doc.  Hist,  of  Am.  Rev.,  1776-1782,  p.  88. 


1778.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY. 


63 


March.  It  was  expected,  with  this  certainty  of  paying 
interest  promptly,  that  twenty  million  dollars  would  be 
raised  by  the  first  of  March,  and  that  no  more  emissions 
of  paper  money  would  be  necessary. 

The  precise  terms  of  the  agreement  by  which  France 
agreed  to  pay  interest  upon  loans  made  in  the  United 
States  have  never  been  ascertained.  Laurens  says,  "  The 
Commissioners  gave  Congress  assurances  of  money  re- 
ceived and  promised  sufficient,  by  subsidies,  to  pay  the 
interest  of  twenty  millions,  if  we  should  be  obliged  to 
borrow  that  sum."  He  afterward  had  reason  for  appre- 
hending that  the  commissioners  were  sure  of  receiving 
only  enough  to  pay  interest  upon  five  millions.1  That 
France  guaranteed  the  payment  of  interest  upon  all  the 
money  that  could  be  borrowed  in  America,  believing  the 
sum  would  not  be  large,  or  for  a  stipulated  amount, 
is  pretty  certain;  for  in  a  letter  written  by  Morris  to 
Franklin,  in  November,  1781,  he  says  that  "it  was  a 
point  understood  in  Congress  very  early,  that  His  most 
Christian  Majesty  would  pay  the  interest  of  certain  mon- 
eys to  be  borrowed  by  Congress  in  America.  Your  Ex- 
cellency knows  better  than  any  other  man  what  passed 
on  that  subject.  Those  circumstances  which  rendered 
an  express  stipulation  improper  then,  have  introduced 
much  delicacy  into  it  now ;  and,  therefore,  I  do  not 
expect  that  the  Court  will  recur  to  a  formal  acknowl- 

1  Franklin  wrote,  May  26,  1779,  "  When  the  commissioners  of  Con- 
gress made  the  proposition  of  paying  the  interest  at  Paris  of  the  money 
borrowed  in  America,  they  understood  the  loan  to  be  of  five  millions  of 
dollars."  —Dip.  Cor.,  vol.  iii.  p.  86. 


64  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 


eclgment  of  what  was  then,  perhaps,  rather  a  personal, 
than  national,  obligation."1 

As  the  army  was  suffering  at  this  time  for  want  of 
supplies,  the  Executive  Council  of  Pennsylvania  laid  an 
embargo  for  thirty  days  on  the  importation  of  provis- 
ions, Congress2  having  previously  recommended  such 
action.  If  the  Confederate  Government  was  slow  and 
timid  in  assuming  authority,  it  did  not  hesitate  to  rec- 
ommend the  severest  measures  to  the  States  for  their 
adoption. 

The  financial  condition  of  the  country  continued  to 
grow  worse.  Congress  did  not  fully  comprehend  the 
gravity  of  the  situation,  and  relying  too  confidently  for 
aid  upon  France,  now  that  an  alliance  was  formed,  fell 
into  a  deplorable  lethargy.     Says  William  Hosmer,  a 

1  Dip.  Cor.  vol.  xii.  p.  35.  The  commissioners  in  France  wrote, 
April  9,  1777,  "having  convinced  the  ministry  of  the  great  importance 
of  keeping  up  the  credit,  and  fixing  the  value  of  our  currency,  which 
might  be  done,  by  paying  in  specie  the  interest  of  what  we  borrow,  or 
in  bills  upon  France,  for  the  amount,  ...  we  are  now  assured,  that" 
quarterly  payments  of  five  hundred  thousand  livres  will  be  continued 
"for  the  purpose  of  paying  the  interest  of  the  five  million  dollars,  you 
are  supposed  to  have  borrowed,  which  we  believe  will  be  punctually 
complied  with"  (Dip.  Cor.  vol.  i.  p.  274).  The  commissioners  do  not 
make  any  subsequent  reference  to  the  promise  of  the  French  Govern- 
ment in  their  allusions  to  the  subject.  See  letters  dated  May  25,  1777, 
Ibid.,  p.  294  ;  Sept.  8, 1777,  Ibid.,  p.  321 ;  Oct.  6,  1777,  Ibid.,  p.  331;  Nov. 
30,  1777,  Ibid.,  p.  342;  Aug.  28,  1778,  Ibid.,  p.  429.  Nov.  7,  1778,  the 
commissioners  write,  "when  it  was  proposed  to  pay  the  interest  here, 
we  had  no  idea  of  so  much  being  borrowed"  (Ibid.,  p.  491).  They 
were  informed  in  the  last-mentioned  letter  by  the  auditor-general  that 
the  amount  of  interest  then  annually  due  upon  the  loan-office  certifi- 
cates amounted  to  two  million  livres  and  a  half. 

2  June  8. 


1778.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  65 


delegate  from  Connecticut,  in  a  letter  to  Gov.  Trum- 
bull1 of  that  State,  "I  wish  I  could  with  truth  assure 
Your  Excellency  that,  in  my  view,  our  affairs  are  in  a 
happy  train,  and  that  Congress  has  adopted  wise  and 
effectual  measures  to  restore  our  wounded  public  credit, 
and  to  establish  the  United  States,  their  liberty,  union 
and  happiness  upon  a  solid  and  permanent  foundation. 
I  dare  not  do  it  while  my  heart  is  overwhelmed  with 
the  most  melancholy  presages.  The  idleness  and  cap- 
tiousness  of  some  gentlemen,  maugre  the  wishes  and 
endeavors  of  an  honest  and  industrious  majority,  in  my 
apprehension,  threaten  the  worst  consequences."  Per- 
haps Congress  thought,  that  by  appointing,  as  they  did,2 
three  days  in  the  week  for  the  consideration  of  financial 
questions,  nothing  more  could  be  done  to  relieve  the 
country.  A  permanent  committee,  consisting  of  Robert 
Morris,  Gerry,  R.  H.  Lee,  Witherspoon,  and  G.  Morris, 
were  finally  appointed  "to  consider  the  state  of  the 
money  and  the  finances  of  the  United  States,"  and 
report  thereon  from  time  to  time.3 

Within  a  month  this  committee  made  a  report,  the 
contents  of  which  can  only  be  conjectured  from  the 
disposition  made  of  it.  Such  parts  as  related  to  a  con- 
federal fund,  and  the  mode  of  issuing  and  accounting  for 
loan-office  certificates,  were  referred  to  a  committee  con- 
sisting of  Duer,  Gerry,  and  Adams.4  Four  days  later, 
another  financial  report  was  made ;  but  whether  it  ema- 
nated from  this  newly-created  committee,  or  the  earlier 


1  Stuart's  Life  of  Trumbull,  p.  413,  note. 

2  Aug.  12,  13.  »  Aug.  27. 


*  Sept.  15. 


66  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 

one,  the  records  of  Congress  do  not  show.  Evidently 
the  report  contained  some  startling  facts  and  opinions; 
for  only  sixty  copies  were  printed,  and  the  printer  was 
required,  under  special  oath,  to  keep  its  contents  secret, 
and  print  no  extras. 

Doubtless  many  plans  were  suggested  for  supplying 
the  national  exchequer  with  money;  but  among  the 
most  interesting  observations  preserved  are  those  of 
Silas  Deane,  who  for  a  considerable  period  served  as 
commissioner  to  France.  His  memorial  to  Congress  on 
the  subject  is  lost;  but  a  letter  addressed  to  the  same 
body  from  Paris,  two  weeks  later,  is  supposed  to  contain 
essentially  the  same  ideas.  In  this  communication  he 
declares  that  "  to  emit  more  bills  will  be  rather  danger- 
ous; for  money,  or  whatever  passes  for  such,  whenever 
it  exceeds  the  amount  of  the  commerce  of  a  State,  must 
lose  its  value ;  and  the  present  circumscribed  state  of 
the  American  commerce  is  perhaps  within  the  amount 
of  your  emissions  already  made.  Your  bills,  therefore, 
must  be  borrowed  of  individuals  by  the  public  at  inter- 
est, or  those  already  emitted  paid  off  by  taxes  and  new 
emissions.  Some  colonies  may  now  be  content  with  a 
tax,  but  it  is  most  probably  quite  out  of  the  power  of 
some,  and  a  measure  rather  impolitic  in  a  majority  of 
the  colonies  or  States,  durante  hello.  The  relying  on 
future  taxes  is  holding  up  to  the  people  a  succession  of 
distresses  and  burthens  which  are  not  to  cease  even  with 
the  war  itself,  whereas  could  they  have  a  prospect  of 
paying  the  expenses  of  the  war  at  the  close  of  it,  and 
enjoying  the  remainder  of  their  fortunes  clear  of  en- 
cumbrance, it  must  greatly  encourage  and  animate  both 


\ 

1778.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  67 


the  public  and  private  spirit  in  pushing  it  on  with 
vigor."  1 

The  difficulty  of  raising  funds  for  prosecuting  the 
war  is  strikingly  illustrated  by  the  adoption  of  a  meas- 
ure, near  the  close  of  1778,  for  furnishing  the  troops 
with  provisions.  This  was  nothing  milder  than  a  recom- 
mendation to  the  States  to  authorize  commissioners  to 
seize  all  goods  required  for  the  use  of  the  armies,  giving 
therefor  certificates  expressing  the  quantity  and  quality 
of  the  commodities  seized,  with  the  prices  affixed,  which 
were  similar  to  those  established  by  the  several  States  a 
few  months  previously.2    A  circular  letter,  setting  forth 

1  Letter  to  Com.  of  Secret  Corres.,  Dip.  Cor.,  vol.  i.  p.  77.  See 
also  his  "Plan  for  sinking  fifty-three  millions  of  dollars  of  the  Con- 
tinental Currency,"  &c.  Ibid.,  p.  160.  It  would  be  quite  impossible 
to  give  all  the  peculiar  ideas  entertained  about  paper  money  by  the 
leading  actors  of  the  revolutionary  period;  but  the  following  views 
of  Thomas  Paine,  who  was  a  very  clear  thinker  and  writer,  are  worthy 
of  a  place  here.  In  the  years  1778-79  he  wrote  several  papers  signed 
"  Common  Sense,"  addressed  chiefly  to  Englishmen,  in  one  of  which 
he  notes  how  "the  people  of  England  seem  to  mistake  their  poverty 
for  their  riches;  that  is,  they  reckon  their  national  debt  as  a  part  of 
their  national  wealth."  After  showing  the  error  in  this  mode  of 
reckoning,  he  observes,  "  The  very  reverse  of  this  was  the  case  with 
America;  she  began  the  war  without  any  debt  upon  her,  and  in  order 
to  carry  it  on,  she  neither  raised  money  by  taxes,  nor  borrowed  it  upon 
interest,  but  created  it ;  and  her  situation,  at  this  time,  continues  so 
much  the  reverse  of  yours,  that  the  taxing  would  make  her  rich, 
whereas  it  would  make  you  poor.  When  we  shall  have  sunk  the 
sum  which  we  have  created,  we  shall  then  be  out  of  debt,  be  just  as 
rich  as  when  we  began,  and  all  the  while  we  are  doing  it,  shall  feel 
no  difference,  because  the  value  will  rise  according  as  the  quantity 
increases."  —  Almon's  Rememb.  for  the  Tear  1778,  and  Beginning  of 
1779,  pp.  323,  324. 

2  Oct.  2. 


68  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 

the  necessity  of  adopting  so  stringent  a  measure,  was 
prepared  by  Congress,  and  transmitted  to  the  States. 
To  what  extent  this  edict  was  executed  we  are  unable 
to  ascertain.  There  is  strong  reason,  however,  for  con- 
cluding that  many  things  were  taken  for  the  use  of  the 
army. 

Though  paper  money  was  taken,  with  more  or  less 
reluctance,  in  return  for  most  things,  some  services  were 
rendered  only  upon  promise  of  receiving  specie.  It  was 
needed  chiefly  by  the  generals  in  procuring  intelligence 
concerning  the  movements  of  the  enemy,  as  no  amount 
of  paper  money  constituted  a  sufficient  inducement  to 
men  to  perform  this  dangerous  service.  Specie  was  also 
proposed  as  a  bounty  to  men  if  they  would  enlist  in  the 
armies ;  yet  this  measure  did  not  meet  with  general 
approval,  as  many  thought  the  effect  of  it  would  be  to 
hasten  the  depreciation  of  paper  money,  which  was 
"already  of  little  value."  Specie  also  had  been  em- 
ployed in  the  expedition  against  Canada.  Six  thousand 
three  hundred  and  sixty-four  pounds  Pennsylvania  cur- 
rency, in  gold  and  silver,1  was  obtained  for  the  use  of 
this  expedition,  which  was  transported  as  far  as  Ticon- 
deroga,  and  remained  there  for  many  months ;  while  debts 
were  pouring  into  Congress  from  every  quarter,  to  be 
discharged.  During  the  entire  year  of  1778,  while  a 
vast  amount  of  paper  money  was  expended,  the  specie 
paid  out  was  exceedingly  small.  In  the  Appendix  to 
the  Journal  of  Congress2  for  that  year  the  following 
figures  are  found :  — 


1  Secret  Journal  of  Cong.,  Oct.  10,  1775.  2  Dec.  29. 


1778.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  69 


Currency  $62,154,842  63 

Specie   78,666  60 

Livres   28,525  00 

This  handful  of  solid  coin,  which  in  gold  would  weigh 
only  seven  hundred  pounds,  and  might  be  put  into  a 
wheel-barrow,  was  the  foundation,  says  Breck,1  of  the 
campaigns  of  that  year. 

The  war,  therefore,  had  been  prosecuted  thus  far  almost 
wholly  with  paper  money.  When  it  was  proposed  to  cap- 
ture Canada,  Congress  recognized  the  necessity  of  pro- 
viding specie  for  the  use  of  the  expedition,  and  it  was 
forthcoming,  yet  failed  to  see  that  specie  was  just  as 
necessary  in  the  campaigns  at  home.  Though  patriotism 
was  a  living  force,  which  gave  a  wonderful  impetus  to  the 
Revolution,  —  indeed,  was  at  the  bottom  of  it,  —  never- 
theless, many  were  quite  as  desirous  of  receiving  a  real 
money  equivalent  for  what  they  sold  as  others  were  to 
whom  the  principle  of  patriotism  was  a  stranger.  Those 
living  south  of  the  St.  Lawrence  were  of  the  same  flesh 
and  blood  as  those  beyond  the  stream,  and  were  actuated 
by  the  same  principles  in  making  exchanges ;  and  Con- 
gress ought  more  firmly  to  have  grasped  this  fact.  Diffi- 
cult as  was  the  effort  to  procure  specie,  it  was  equally 
difficult  to  extract  value  from  a  paper  currency  based 
upon  nothing.  The  mistake  of  Congress  was  in  not 
applying  the  same  principles  in  dealing  with  Americans 
which  the  members  proposed  to  apply  in  treating  with 
the  inhabitants  of  Canada.2 

1  Hist.  Sketch  of  Cont.  Paper  Money,  p.  13. 

2  The  Canadian  campaign  proved  a  failure;  and  the  complete  annihi- 
lation of  the  credit  of  the  United  States  in  that  country  is  illustrated  by 


70 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 


During  the  year  1778  fourteen  issues  of  paper  money 
were  authorized,  aggregating  $63,500,000.  Two  issues 
in  December  were  for  ten  million  dollars  each ;  another 
issue  of  the  same  amount  was  ordered  in  September,  and 
twenty  million  dollars  during  the  months  of  May,  June, 
and  July.  The  effect  of  these  measures  was  well  under- 
stood, but  Congress  felt  compelled  to  resort  to  them  to 
raise  money.  Not  that  other  measures  were  disregarded, 
as  we  have  already  seen. 

the  following  incident,  extracted  from  the  report  of  the  commissioners 
in  Canada  to  the  president  of  Congress:  "  Your  army  is  badly  paid;  and 
so  exhausted  is  your  credit  that  even  a  cart  cannot  be  procured  without 
ready  money  or  force.  We  will  give  you  an  instance  of  the  lowness  of 
your  credit.  Three  barrels  of  gunpowder  were  ordered  from  Chamblay 
to  Montreal ;  this  powder  was  brought  from  Chamblay  to  a  ferry,  about 
three  miles  off,  where  it  would  have  remained  had  we  not  luckily  passed 
by,  and,  seeing  the  distress  of  the  officer,  undertaken  to  pay  ready  and 
hard  money  for  the  hire  of  a  cart  to  convey  it  to  Longueil." — Report 
dated  May  27,  1776:  Carroll's  Visit  to  Canada  in  1776,  p.  29. 


1779.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  71 


CHAPTER  VI. 

ADMINISTRATION  OF  THE  BOARD  OF  TREASURY. 
1779. 

One  of  the  earliest  financial  measures  of  the  year 
was  a  fresh  attempt,  on  the  part  of  Congress,  to  provide 
a  fund  for  the  liquidation  of  all  bills  of  credit  issued 
by  the  government,  besides  any  additional  issues  that 
might  be  put  forth.  To  this  end,  Congress  requested 
the  several  States  to  raise  their  respective  quotas  of 
fifteen  million  dollars  for  the  year  1779,  and  six  million 
dollars  annually  for  eighteen  years  thereafter,  as  a  fund 
for  sinking  the  emissions  and  loans  which  had  now 
grown  so  numerous  and  heavy.  As  though  Congress 
had  despaired  of  obtaining  financial  aid  in  any  other 
manner,  a  law  was  passed  "  that  any  of  the  bills  emitted 
by  order  of  Congress,  prior  to  the  year  1780,  and  no 
others,  be  received  in  payment  of  the  said  quotas,"  thus 
restricting  the  use  of  State  issues,  and  impairing  their 
value ;  but  the  value  of  Continental  money,  instead 
of  improving,  was  unfavorably  affected  by  the  measure. 
Congress  had  recommended  the  States  to  withdraw  their 
bills,  in  payment  of  taxes,  and  in  other  ways;  but, 
whether  the  States  complied  with  the  recommendation 
or  not,  they  could  not  force  the  General  Government 
to  receive  them  contrary  to  the  will  of  Congress.  The 


72  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 

resolutions  also  prescribed  how  the  bills  received  within 
the  time  limited  should  be  applied.  Except  those  issued 
for  the  year  1779,  the  bills  were  to  be  applied,  first,  in 
payment  of  the  interest,  and,  secondly,  of  the  principal, 
of  loans  made  by  the  United  States  prior  to  the  year 
1780;  and  the  residue,  together  with  those  received  on 
the  quotas  of  the  year  1779,  were  to  be  destroyed.1 

Congress  also  ordered  the  Board  of  Treasury  to  pre- 
pare a  circular  letter  to  the  States  to  accompany  the 
foregoing  resolves.  This  may  be  thought  a  very  impo- 
tent enforcement  of  the  determination  of  Congress ;  but 
what  else  could  be  done?  It  must  ever  be  kept  in 
mind  that  many  of  the  delegates  were  very  jealous  con- 
cerning the  exercise  of  any  authority  over  the  States 
by  the  General  Government,  vhile  their  constituents  at 
home  shared  this  feeling  still  more  strongly.  So  long 
as  such  fears  existed,  which  were  often  openly  expressed, 
is  it  not  just  to  suppose  that  Congress  went  to  the 
furthest  boundary  of  prudence  in  making  demands  upon 
the  States? 

The  circular  letter2  accompanying  the  resolutions  de- 
clared that,  "from  necessity"  was  attempted  the  expedient 
of  emitting  paper  money  on  the  faith  of  the  United  States, 
for  the  expenses  of  the  war,  —  an  expedient  which  had 
often  been  successfully  practised  in  the  separate  States 
when  they  were  Colonies  of  Great  Britain.  The  impla- 
cable vengeance  with  which  the  States  had  been  pursued 
had  compelled  them  to  the  most  strenuous  and  unremit- 
ting efforts.  Large  issues  of  money,  consequently,  were 
indispensably  necessary,  and  the  paper  currency  had  mul- 
i  Jan,  2,  5,  14.  2  JaD.  13. 


1779.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  73 


tiplied  beyond  what  was  competent  for  the  purpose  of  a 
circulating  medium.  "  This  alone  could  not  fail  to  dis- 
credit it  in  some  degree :  the  arts  of  an  unprincipled 
enemy  have  increased  the  mischief.  In  despair  of  sub- 
duing the  free  spirits  of  America  by  the  force  of  arms 
or  intrigues  of  negotiation,  as  their  last  effort  they  have 
had  recourse  to  fraud.  Their  emissaries  have  been  em- 
ployed in  a  variety  of  artifices  to  debase  our  money,  and 
to  raise  the  price  of  commodities.  The  fears  and  appre- 
hensions of  the  people  have  been  alarmed  by  misrepre- 
sentations, while  our  enemies  of  the  highest  rank  have 
not  hesitated  to  counterfeit  the  bills  of  credit  and  dis- 
perse them  through  the  United  States." 

These  embarrassments  to  a  free  circulation  of  paper 
money  loudly  called  for  a  remedy;  and  Congress,  from 
a  regard  to  good  faith,  to  private  justice,  and  to  public 
safety,  felt  bound  to  apply  it.  To  raise  the  value  of 
paper  money,  and  to  redeem  it,  would  not  be  difficult ; 
nor  would  the  effort  to  check  and  defeat  the  pernicious 
circulation  of  counterfeits  be  impracticable.  Without 
public  inconvenience  or  private  distress,  the  whole  of 
the  debt  incurred  in  paper  emissions  might  be  cancelled 
by  taxes,  and  within  a  period  so  limited  as  to  leave  the 
possessor  of  the  bills  satisfied  with  his  security;  and  if, 
by  a  continuance  of  the  war,  the  public  service  should 
demand  further  emissions,  they,  too,  might  be  cancelled 
within  the  same  period,  44  it  being  evident  that  our  ability 
to  sustain  a  tax  must  increase  in  proportion  to  the  quan- 
tity of  money  in  circulation." 

The  danger  from  counterfeits  could  only  be  avoided 
by  calling  in  and  exchanging  the  emissions  with  which 


74  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 

the  counterfeiter  had  chiefly  busied  himself.  To  publish 
the  marks  of  detection,  and  still  leave  the  true  bills  cur- 
rent, would  not  be  prudent,  as  it  would  afford  an  oppor- 
tunity of  correcting  defects,  and  cheating  more  securely. 

"To  defend  the  emission  intended  for  the  exchange 
from  counterfeit,  the  strongest  guards  will  be  devised, 
and  it  is  expected  that  the  marks  of  authenticity  will 
be  so  obvious,  and  the  difficulty  of  successful  imitation 
so  great,  as  to  discourage  the  attempt  or  elude  its 
effects." 

Congress  evidently  had  a  premonition  of  the  immense 
amount  of  paper  money  to  be  put  afloat  during  the  year ; 
for  the  Committee  of  the  Treasury  were  authorized  to 
contract  with  proper  persons  to  act  as  signers  of  the 
bills  for  the  year,  whose  remuneration  was  not  to  ex- 
ceed four  dollars  per  thousand  for  each  signer.1  Just 
before  this  action,  Congress  had  ordered  another  issue,2 
which  was  to  be  exchanged  for  the  counterfeits  with- 
drawn from  circulation,  and,  during  the  first  four  months 
of  the  year,  $65,000,880  were  issued.  Congress  also 
sought  to  procure  a  domestic  loan  for  twenty  million 
dollars  more.3 

The  effect  of  these  enormous  emissions  was  to  impair 
irretrievably  the  value  of  all  the  issues;  yet  Congress, 
unmindful  of  the  extremely  critical  condition  of  the 
finances,  and  without  attempting  to  devise  proper  reme- 
dies, was  engaged  in  a  profitless  and  discreditable  contro- 
versy with  Silas  Deane  concerning  his  conduct  as  one  of 
the  commissioners  of  the  United  States  to  the  French 
court. 

i  Jan.  4,  13.  8  Jan.  2.  »  Feb.  3. 


1779.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  75 

It  may  not  be  without  interest  to  the  reader  to  stop  for 
a  moment  and  look  at  a  picture  of  the  condition  of  the 
country,  drawn  by  a  Frenchman,  Baron  de  Bonstellin,1 
who  had  followed  the  fortunes  of  Lafayette,  and  was  at 
this  time  serving  as  lieutenant-colonel  in  the  army: 
"  This  country  is  in  a  state  of  languor  and  despair,  or 
rather  anarchy,  for  every  one  does  as  he  pleases,  from 
whence  proceed  the  greatest  horrors  and  calamities  im- 
aginable. Among  other  things  the  dearness  of  provisions, 
and  of  every  other  necessary  of  life  exceeds  all  example. 
Nothing  is  to  be  seen  but  Congress  paper,  which  is  so 
depreciated,  that  a  piastre  in  money  is  worth  twelve  or 
fifteen  in  paper.  Few  ships  come  here,  on  account  of  the 
little  value  of  Congress  paper,  and  that  there  is  nothing 
but  tobacco  to  be  had  in  return,  which  bears  a  very  low 
price  in  France  at  this  time.  It  was  with  the  utmost 
difficulty  that  they  could  procure  a  little  flour  for 
d'Estaing's  fleet,  and  it  requires  every  exertion  they  can 
make  to  supply  their  own  army  which,  after  all,  is 
wretchedly  provided.  Upon  the  whole,  this  country 
suffers  more  from  its  internal  management,  than  from 
the  war  itself,  and  if  peace  is  not  soon  made,  and  good 
order  re-established,  it  will  experience  such  revolutions 
as  are  shocking  to  think  of.  The  Congress  likewise  are 
perplexed  how  to  act,  having  lost  all  authority  over  the 
people.  Every  one  proceeds  with  caution  ;  distress  and 
misery  are  daily  increasing." 

Paper  money  had  depreciated  so  much  by  the  last  of 
May,  that  the  president  of  the  Council  of  Pennsylvania, 
and  other  gentlemen,  presented  a  memorial  to  Congress, 

1  Newspaper  Cuttings,  vol.  v.  p.  215,  N.  Y.  Hist.  Lib. 


76  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 


setting  forth  their  hardships,  and  asking  for  co-operation 
and  relief.1  Their  object  was  to  avert  an  impending 
popular  movement.  A  public  meeting  had  been  called, 
for  the  purpose  of  considering  the  subject  of  depreciation, 
and  it  was  feared,  that,  if  the  people  grew  excited,  they 
might  become  violent.  The  petition  was  referred  to  the 
Treasury  Board,  and  their  report,  which  was  an  address 
to  the  States,  declared  that  the  present  situation  of  public 
affairs  demanded  the  most  serious  attention,  especially 
that  the  condition  of  the  currency  required  the  imme- 
diate, strenuous,  and  united  efforts  of  all  true  friends  to 
their  country  for  preventing  an  extension  of  the  mischiefs 
whicn  had  already  flowed  from  that  source. 

Having  declared  that  Congress  was  "obliged  to  emit 
paper  money," 2  the  policy  was  defended  by  affirming  the 
people  knew  this  expedient  had  ubeen  before  generally 
and  successfully  practised  on  this  Continent."  Congress 
was  sensible  of  the  inconveniences  —  a  very  mild  term 
in  which  to  express  the  consequences  of  using  paper 
money  —  which  would  attend  too  frequent  emissions,  and 
had  endeavored  to  avoid  them.  For  this  purpose,  loan- 
offices  were  established  as  early  as  October,  1775 ;  and, 
from  that  time  to  the  present,  Congress  had  repeatedly 
and  earnestly  solicited  the  people  to  loan  their  money  on 
the  faith  of  the  United  States.  Nevertheless,  the  sums 
received  in  this  way  had  proved  unequal  to  the  public 
exigencies.  In  consequence  of  the  activity  of  the  enemy, 
both  on  sea  and  land,  taxation  at  home,  and  borrowing 
abroad,  had  been  alike  impracticable.  Hence  the  necessity 
of  continuing  emissions  of  paper  money. 

i  Phillips,  p.  118.  2  May  26. 


1779.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY. 


77 


But  depreciation  was  not  imputed  to  these  causes  alone. 
"  We  have  too  much  reason  to  believe  it  has  been  in  part 
owing  to  the  artifices  of  men  who  have  hastened  to 
enrich  themselves  by  monopolizing  the  necessaries  of  life, 
and  to  the  misconduct  of  inferior  officers  employed  in  the 
public  service."  Vain,  indeed,  were  the  efforts  of  Con- 
gress to  form  plans  of  economy,  to  stop  emissions  of 
paper  money,  if  the  people  did  not  zealously  co-operate 
in  promoting  this  design,  and  use  the  utmost  industry  to 
prevent  the  waste  of  money  in  every  branch  of  service* 
A  compliance  with  the  recommendations  for  supplying 
money,  it  was  properly  added,  might  enable  Congress  to 
give  speedy  answers  to  the  public,  that  no  more  emissions 
should  take  place,  and  thereby  close  that  source  of  depre- 
ciation. 

At  the  same  time,  Congress  "judged  it  indispensably 
necessary  "  to  call  for  forty -five  million  dollars  in  addition 
to  the  fifteen  millions  asked  at  the  beginning  of  the  year, 
which  the  States  were  requested  to  pay  into  the  Conti- 
nental treasury  as  soon  as  possible,  and,  at  the  farthest, 
before  the  end  of  the  year.  Probably  this  was  not  a 
very  acceptable  reply  to  many  a  grumbler;  but  what 
better  answer  could  Congress  make?  Every  conceivable 
way  had  been  tried  to  raise  money  beside  resorting  to 
paper  emissions. 

The  delegates  from  Rhode  Island  were  opposed  to 
raising  so  large  a  sum  from  the  States ;  but  they  were 
almost  alone  in  their  opposition,  as  the  representatives 
from  only  one  other  State  shared  similar  views.  William 
Ellery,1  one  of  the  Rhode-Island  delegates,  wrote  to  Gov. 

1  May  25,  1779,  Staples' s  Hist,  of  R.  I.  in  the  Cont.  Cong.,  p.  235. 


78  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 


Greene,  that  the  great  majority  on  this  occasion,  and 
the  declarations  made  by  members  during  the  course 
of  the  debate,  led  him  to  believe  that  great  exertions 
would  be  made  by  the  States  to  collect  their  quotas.  He 
then  adds,  "  The  more  that  is  collected  by  taxation,  the 
less  it  will  be  necessary  to  loan,  in  order  to  put  a  stop  to 
further  emissions,  which  is  the  wish  of  all.  A  stoppage 
of  the  press  once  effected,  our  liberties  are  established, 
and  an  end  is  put  to  the  war.  Our  enemy's  whole  de- 
pendence now  rests  upon  our  being  crushed  with  whole 
reams  of  depreciated  paper  money.  Once  remove  that 
ground  of  hope  and  they  will  offer  us  honorable  terms  of 
peace." 

The  people  of  Philadelphia,  alarmed  at  the  condition 
of  the  money,  and  desirous  of  aiding  the  government, 
adopted  a  plan  at  a  town-meeting1  for  stopping  the 
paper  issues  of  Pennsylvania,  and  for  raising  a  revenue 
by  subscription.  It  was  known  as  "  The  Citizen's  Plan ;  " 2 
and,  in  the  address  directed  to  the  President  and  Supreme 
Executive  Council  of  the  State,  they  were  requested  to 
confer  with  Congress  on  the  subject,  and  to  urge  that 
body  to  recommend  the  general  adoption  of  the  plan. 
The  Executive  Council  were  also  requested  to  transmit 
the  scheme  to  the  several  States,  under  the  sanction  of 
their  recommendation ;  while  the  citizens  themselves  re- 
solved to  send  the  plan  to  citizens  of  each  State  at  the 
earliest  opportunity.  The  people  were  divided  upon 
the  efficienc}^  of  this  measure ;  and  President  Reed 3  of 
Pennsylvania  wrote  that  an  interesting  struggle  was 

1  Perm.  Packet,  July  27,  1779.    2  Penn.  Archives,  vol.  vii.  p.  621. 
8  Ibid.,  p.  572. 


1779.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  79 

going  on  concerning  the  Continental  money,  as  to 
whether  it  would  die  without  hope  of  resuscitation,  or 
whether,  by  a  vigorous  political  effort,  it  would  emerge 
from  the  trial,  having  the  confidence  and  value  imposed 
in  it  during  the  earlier  days.  When  received  by 
Congress,  the  plan  was  referred  to  the  Board  of 
Treasury. 

Shortly  after  the  address  of  Congress,  which  has  been 
briefly  sketched,  two  committees  were  appointed,  —  one 
to  make  thorough  inquiry  "into  the  establishments  and 
contingent  expenses  of  the  respective  boards  and  de- 
partments," and  to  report  what  retrenchment  and  ref- 
ormation seemed  expedient:  the  other  to  conduct  a 
more  special  investigation,  with  reference  to  the  expenses 
of  the  medical,  commissary-general  and  quartermaster- 
general's  departments.1  These  had  grown  enormously, 
and,  it  was  generally  believed,  were  a  consequence  of 
"allowing  commissions  to  the  numerous  persons  em- 
ployed in  purchasing  for  the  army."  Truly  there  was 
urgent  need  of  investigation.  Extravagance  had  crept 
into  every  department,  nor  was  corruption  unknown  even 
in  those  early  days. 

These  committees  suggested  improvements  in  the  man- 
ner of  keeping  the  paymaster-general's  office,  also  that 
the  governors  of  the  States  should  be  requested  to  make 
an  inquiry  into  the  conduct  of  those  employed  to  trans- 
act the  business  of  the  General  Government,  for  the 
purpose  of  removing  suspected  persons,  and  of  securing 
various  other  needed  reforms.2  Not  the  least  among 
the  reforms  executed  at  this  time  was  the  removal  of  Dr. 
1  May  28.  2  May  29,  July  9. 


80  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 


Morgan,  director-general  of  the  hospitals  and  physician- 
in-chief  to  the  armies.1 

Congress  might  have  discovered  a  way  of  saving  much 
by  altering  the  mode  of  enlistments  in  the  army.  The 
policy  of  enlisting  men  for  a  short  time  had  been  con- 
tinued from  the  beginning,  notwithstanding  the  contrary 
advice  of  Washington  and  others,  who  clearly  saw  the 
great  expense  and  other  evils  growing  out  of  the  pre- 
vailing system.  uHad  my  advice,"  says  Washington,2 
writing  in  August,  1779,  "respecting  this  matter  been 
pursued  in  the  years  '75  and  '76,  our  money  would  have 
been  upon  a  very  different  establishment  in  point  of 
credit  to  what  it  is  at  this  day,  and  we  should  have 
saved  millions  of  pounds  in  bounty  money,  and  the 
consequent  evils  of  expiring  armies  and  new  levies." 
Yet  the  old  system  was  continued,  notwithstanding  the 
obvious  economy  and  efficiency  of  permanent  enlistments. 

The  next  effort  of  Congress  in  the  way  of  raising 
money  outside  of  the  old  expedient  of  issuing  more  bills 
of  credit  was  a  loan  of  twenty  million  dollars  which 
Congress  vainly  hoped  would  be  raised  by  the  loan- 
offices.3    The  States  were  recommended  to  appoint  per- 

1  Independent  Chronicle,  Sept.  9,  1779. 

2  Letter  to  Reed,  Reed's  Life  of  Reed,  vol.  ii.  p.  124. 

8  June  11.  Ellery  and  Collins,  delegates  from  Rhode  Island,  wrote 
to  Gov.  Greene  of  that  State,  June  4,  1779,  "  Congress  has  ordered  a 
loan  of  twenty  millions  continental  dollars,  hut  has  not  yet  agreed  upon 
the  terms  of  borrowing.  As  it  may  be  very  difficult  to  collect  our  quota 
of  the  continental  tax  in  season,  would  it  not  be  advisable  to  hire  a 
part  of  it  at  a  moderate  interest,  to  be  paid  when  the  tax  should  be 
collected.  It  is  thought  that  those  who  hold  considerable  sums,  would 
be  willing  to  lend  on  this  occasion.    Every  effort  will  be  made  by 


1779.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  81 


sons  of  character  and  influence  in  every  county,  town, 
and  district,  to  receive  subscriptions.  None  were  to  be 
taken  for  less  than  five  hundred  dollars,  and,  if  any 
person  subscribed  ten  thousand  dollars  or  more,  he 
might  pay  one-half  of  the  subscription  within  fourteen 
days  from  the  time  of  subscribing,  and  the  remainder 
before  the  first  of  October ;  and,  b}^  way  of  an  induce- 
ment to  make  so  large  a  subscription,  the  whole  amount 
was  to  draw  interest  from  the  time  of  the  first  payment, 
provided  the  balance  was  punctually  paid.  Each  lender 
was  to  elect,  either  to  receive  the  principal  at  the  ex- 
piration of  three  years  from  the  date  of  the  loan,  or  to 
continue  it  on  interest  "  until  the  whole  amount  of  Con- 
tinental bills  circulating  shall  not  exceed  the  sum  in 
circulation  at  the  time  of  the  loan."  One  of  the 
greatest  difficulties  in  this  scheme  was  to  regulate  the 
payment  of  interest,  since  the  Continental  money  was 
depreciating,  and  payment  of  six  or  seven  per  cent 
might  turn  out  to  be  an  exceedingly  small  compensa- 
tion for  the  use  of  the  money.  It  is  true  that  Congress, 
until  this  time,  had  stoutly  maintained  the  worth  of 
Continental  paper  money;  but  the  bill  which  finally 
passed  on  the  29th  of  June  clearly  recognized  the 
fact '  of  depreciation.  Considerable  discussion  arose  in 
determining  the  rate  of  interest,  and  the  subject  was 
repeatedly  taken  up  and  postponed  before  reaching  a 
conclusion.    In  the  end,  it  was  decided  that  interest 

Congress  to  put  our  finances  on  such  a  footing  as  to  stop  any  further 
emission  of  money  ;  and  it  is  hoped  that  every  friend  to  his  country 
will  lend  his  aid  to  give  efficiency  to  this  measure." — Staples,  Hist, 
of  R.I.  in  the  Cont.  Cong.,  p.  241. 


82  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 

should  be  paid  annually  at  the  loan-offices  where  the 
money  was  subscribed ;  and  then  follows  the  resolution 
which  puzzled  Congress  so  long :  "  When  the  interest 
on  monies  which  have  been  or  may  be  placed  in  the 
several  loan  offices  on  or  after  the  first  day  of  March, 
1778,  shall  become  due  and  be  paid,  the  same,  until 
some  more  accurate  standard  of  value  can  be  devised, 
shall  be  increased  in  proportion  to  the  increase  of"  the 
sum  of  Continental  paper  money  which  may  be  in  cir- 
culation after  the  date  of  such  loans  respectively." 1 
Such  was  the  result  of  the  deliberations  of  Congress  in 
dealing  for  the  first  time  with  the  question  of  a  depreci- 
ated money.  Doubtless,  the  members  reached  this  con- 
clusion tremblingly ;  seeing,  as  they  did,  what  a  blow  it 
was  to  paper  money,  the  force  of  which  the  public  would 
soon  inevitably  feel. 

On  the  16th  of  August  the  Board  of  Treasury  reported 
a  table  of  the  first  year's  interest  to  be  paid  on  moneys 
which  had  been  placed  in  the  several  Continental  loan- 
offices  between  March  and  September,  1778,  calculated 
for  each  day  on  which  the  money  had  been  lent,  in  pur- 
suance of  the  resolve  regulating  the  interest  payable  on 
the  public  loan,  whereupon  the  board  was  directed  to 
take  proper  measures  for  carrying  out  the  resolution. 

While  Congress  was  trying  to  borrow  money  through 
the  agency  of  the  loan-offices,  that  body  still  contrived 
to  push  out  paper  money  into  the  fearfully  swollen 
stream.  Between  the  first  of  May  and  first  of  September, 
$35,000,480  had  been  issued ;  yet  there  seemed  to  be  no 
other  resource.    Efforts  to  borrow  money  had  succeeded 

i  June  18,  23,  25,  29. 


1779.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  83 

poorly,  taxes  were  reluctantly  paid,  foreign  loans  were 
negotiated  with  extreme  difficulty,  and,  whatever  could 
be  done  in  that  way,  Franklin,  Adams,  Jay,  and  other 
agents  had  accomplished.  On  the  26th  of  August  the 
Board  of  Treasury  were  directed  to  lay  before  Congress, 
by  the  10th  of  September,  an  account  of  the  money 
received  at  the  loan-offices  to  that  date,  and  also  the 
amount  of  paper  emissions  then  afloat.  Concluding  that 
an  absolute  limit  ought  to  be  fixed  to  the  emission  of 
bills  of  credit,  Congress  resolved  that  on  no  account 
should  more  than  1200,000,000  be  emitted,  nor  any  more, 
indeed,  provided  a  sufficient  supply  of  money  for  the 
public  exigencies  could  be  obtained  in  any  other  way.1 
Two  days  later  the  same  declaration  was  repeated. 

Not  long  afterward,  Congress  issued  another  address 
to  a  despairing  people.2  The  debt  was  described  as  con- 
sisting of  8159,948,880  already  emitted  and  circulating ; 
money  borrowed  before  the  first  of  March,  1778,  amount- 
ing to  $7,545,196,  bearing  interest  payable  in  France ; 
money  borrowed  since  that  time,  the  interest  on  which 
was  payable  in  America,  126,188,909.  Other  sums  due 
abroad,  but  not  exactly  known,  the  balance  not  having 
been  transmitted,  were  estimated  at  $4,000,000.  Not 
more  than  13,027,560  had  been  brought  into  the  treasury 
in  the  way  of  taxes ;  so  that  all  the  funds  supplied  to 
Congress  by  the  people  of  America  did  not  exceed 
136,761,665.  "Judge  then,"  says  the  address,  "of  the 
necessity  of  emissions  and  loans,  from  whom  and  from 
whence  that  necessity  arose." 

The  swelling  of  prices  incident  to  the  issue  of  so  much 

1  Sept.  1.  2  Sept.  13. 


84  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 

money  was  considered,  and  also  the  necessity  of  providing 
troops  and  supplies  to  continue  the  war,  after  which  Con- 
gress proceeded  to  discuss  the  causes  of  the  depreciation 
of  paper  money:  "The  depreciation  of  bills  of  credit  is 
always  either  natural  or  artificial,  or  both.  The  latter  is 
our  case.  The  moment  the  sum  in  circulation  exceeded 
what  was  necessary  as  a  medium  in  commerce,  it  began 
and  continued  to  depreciate  in  proportion  as  the  amount 
of  the  surplus  increased ;  and  that  proportion  would  hold 
good  until  the  sum  emitted  should  become  so  great  as 
nearly  to  equal  the  value  of  the  capital  or  stock,  on  the 
credit  of  which  the  bills  were  issued.  Supposing,  there- 
fore, that  $30,000,000  was  necessary  for  a  circulating 
medium,  and  that  $160,000,000  had  issued,  the  natural 
depreciation  is  but  little  more  than  as  five  to  one :  but 
the  actual  depreciation  exceeds  that  proportion,  and  that 
excess  is  artificial.  The  natural  depreciation  is  to  be 
removed  only  by  lessening  the  quantity  of  money  in 
circulation.  It  will  regain  its  primitive  value  whenever 
it  shall  be  reduced  to  the  sum  necessary  for  a  medium  of 
commerce.  This  is  only  to  be  effected  by  loans  and 
taxes." 

The  artificial  depreciation  was  regarded  as  a  more 
serious  matter.  It  had  grown  out  of  distrust  entertained 
by  the  mass  of  the  people,  either  in  the  ability  or  inclina- 
tion of  the  United  States  to  redeem  their  bills.  The 
ability  of  the  United  States  to  redeem  them  depended, 
first,  upon  the  success  of  the  present  Revolution,  and, 
secondly,  on  the  sufficiency  of  the  natural  wealth,  value, 
and  resources  of  the  country. 

Having  shown  the  certainty  of  success  in  the  Revolu- 


1779.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  85 


tion,  the  reasoning  in  the  address  on  the  second  point  was 
as  follows:  "Let  us  suppose  for  the  sake  of  argument, 
that  at  the  conclusion  of  the  war,  the  emissions  should 
amount  to  1200,000,000 ;  that  exclusive  of  supplies  from 
taxes,  which  will  not  be  inconsiderable,  the  loans  should 
amount  to  1100,000,000,  then  the  whole  national  debt  of 
the  United  States  would  be  $300,000,000.  There  are  at 
present  3,000,000  of  inhabitants  in  the  thirteen  States; 
three  hundred  million  of  dollars,  divided  among  three 
million  of  people,  would  give  to  each  person  one  hundred 
dollars ;  and  is  there  an  individual  in  America  unable,  in 
the  course  of  eighteen  or  twenty  years,  to  pay  it  again  ? 
Suppose  the  whole  debt  assessed,  as  it  ought  to  be,  on 
the  inhabitants  in  proportion  to  their  respective  estates, 
what  would  then  be  the,  share  of  the  poorer  people? 
Perhaps  not  ten  dollars.  Besides,  as  this  debt  will  not  be 
payable  immediately,  but  probably  twenty  years  allotted 
for  it,  the  number  of  inhabitants  by  that  time  in  America 
will  be  far  more  than  double  their  present  amount." 
Thus  a  great  part  of  the  debt  would  be  payable,  not 
merely  by  the  present  number  of  inhabitants,  but  by  a 
large  addition  attracted  thither  from  the  Old  World. 
"  Let  it  be  remembered  that  paper  money  is  the  only  kind 
of  money  which  cannot  6  make  unto  itself  wings  and  fly 
away?  It  remains  with  us,  it  will  not  forsake  us,  it  is 
always  ready  and  at  hand  for  the  purpose  of  commerce 
or  taxes,  and  every  industrious  man  can  find  it." 

Thus  far  the  address  proceeded  very  glibly;  but  the 
second  portion,  relating  to  the  inclination  of  the  people 
to  pay  the  debt,  it  was  not  so  easy  to  write  in  hopeful 
and  inspiring  language.  Three  questions  were  consid- 
ered :  — 


86  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 


Whether,  and  in  what  manner,  the  faith  of  the  United 
States  had  been  pledged  for  the  redemption  of  their  bills ; 

Whether  they  had  put  themselves  in  a  political  capa- 
city to  redeem  them  ;  and 

Whether,  admitting  the  two  former  propositions,  there 
was  any  reason  to  apprehend  a  wanton  violation  of  the 
public  faith  ? 

The  first  two  questions  Congress  found  no  difficulty 
in  answering ;  for,  assuredly,  if  ever  a  government  had 
pledged  its  faith,  Congress  again  and  again  had  pledged 
the  public  faith  in  respect  to  the  payment  of  the  bills 
of  credit  issued  by  their  authority.  Concerning  the  sec- 
ond question,  Congress  declared  that,  "  there  does  at 
present  exist  a  perfect  solemn  confederation,  and  there- 
fore that  the  States  now  are  and  always  will  be  in  po- 
litical capacity  to  redeem  their  bills,  pay  their  debts  and 
settle  their  accounts." 

In  regard  to  the  apprehension  of  a  wanton  violation 
of  the  public  faith,  Congress,  with  a  lofty  indignation, 
declared  it  was  with  great  regret  and  reluctance  that 
"  we  can  prevail  upon  ourselves  to  take  the  least  notice 
of  a  question  which  involves  in  it  a  doubt  so  injurious 
to  the  honor  and  dignity  of  America."  In  the  same 
high-toned  language  Congress  proceeds :  "  We  should 
pay  an  ill  compliment  to  the  understanding  and  honor 
of  every  true  American,  were  we  to  adduce  many  argu- 
ments to  show  the  baseness  or  bad  policy  of  violating 
our  national  faith,  or  omitting  to  pursue  the  measures 
necessary  to  preserve  it.  A  bankrupt  faithless  repub- 
lic would  be  a  novelty  in  the  political  world,  and  ap- 
pear among  respectable  nations  like  a  common  prostitute 


1779.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  87 

among  chaste  and  respectable  matrons.  The  pride  of 
America  revolts  from  the  idea:  her  citizens  know  for 
what  purposes  these  emissions  were  made,  and  have  re- 
peatedly pledged  their  faith  for  the  redemption  of  them ; 
they  are  to  be  found  in  every  man's  possession,  and 
every  man  is  interested  in  their  being  redeemed,  they 
must  therefore  entertain  a  high  opinion  of  American 
credulity,  who  suppose  the  people  capable  of  believing, 
on  due  reflection,  that  all  America  will,  against  the 
faith,  the  honor  and  the  interest  of  all  America  be  ever 
prevailed  upon  to  countenance,  support,  or  permit  so 
ruinous,  so  disgraceful  a  measure." 

Such  are  the  main  points  of  this  remarkable  address, 
which  ought  to  have  stirred  the  heart  of  every  patriot 
to  renewed  exertions  in  aiding  the  weak  and  throttled 
government.  Congress  had  been  frank,  and  had  told  the 
people  the  worst,  —  an  example  worthy  of  imitation  in 
all  governments  and  great  institutions.  Nothing  was 
concealed :  the  enormous  indebtedness,  the  weakness  of 
the  government,  the  necessity  of  the  States  coming  to  the 
rescue,  were  set  forth  in  the  pure  color  of  truth.  Con- 
gress now  determined  to  make  stricter  requisitions  upon 
the  States.  This  could  be  clone,  because  the  success  of 
the  Revolution  was  assured,  and  the  people  had  relin- 
quished all  hope  of  reconciliation  with  Great  Britain. 
Besides,  the  members  of  Congress  had  recovered  from 
their  fright,  and  now  realized  the  absolute  necessity  of 
getting  relief  from  the  States,  or  else  of  seizing  what- 
ever was  needed  in  order  to  sustain  the  armies,  and 
carry  on  the  war.    Therefore,  in  October,1  it  was  re- 


1  Oct.  6,  7. 


88 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 


solved  to  call  upon  the  States  for  fifteen  million  dollars 
in  addition  to  previous  sun^s,  which  they  were  to  raise 
in  such  a  manner  as  they  deemed  most  expedient,  and 
which  were  to  be  paid  into  the  Continental  treasury, 
or  to  the  order  of  Congress,  in  monthly  instalments, 
between  the  first  days  of  February  and  of  October  fol- 
lowing. They  were  also  charged  with  interest  at  six 
per  cent  upon  all  deficiencies  in  the  several  quotas  pre- 
viously requested.  To  encourage  persons  to  make  loans 
of  ten  thousand  dollars  or  more,  the  time  for  making 
them  was  extended;  and,  when  one-half  of  such  a  loan 
was  paid,  the  whole  was  to  bear  interest,  if  the  balance 
were  forthcoming  within  two  months  from  the  time  of 
the  first  payment. 

At  the  same  time  this  action  was  taken,  a  letter  was 
sent  to  the  States,1  telling  them  the  paper  money  that  Con- 
gress was, at  liberty  to  emit  would  probably  be  expended 
by  the  beginning  of  December,  after  which  time  supplies 
must  be  furnished  by  the  States.  The  prospect  was  dark 
enough ;  yet  Congress  cherished  the  hope,  that,  by  means 
of  taxes  and  other  salutary  measures,  the  prices  of  things 
would  be  reduced,  the  quotas  asked,  in  part  at  least,  be 
paid,  and,  after  paying  other  expenses,  a  balance  be  left 
to  apply  on  the  public  debt. 

Before  the  close  of  November  two  hundred  million 
dollars  of  paper  money  had  been  issued,  the  final  issue 
slightly  exceeding  five  million  dollars.2  During  the  year, 
8140,052,480  had  been  thrown  into  circulation,  —  nearly 
three-fourths  of  the  entire  amount  issued  during  the  war. 
No  wonder  why  such  a  vast  mass  so  soon  sunk  out  of  sight. 

J  Oct.  9.  2  Oct.  14,  Nov.  17,  29. 


1779.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY. 


89 


Having  completely  exhausted  the  fountain  of  paper 
money,  and  the  army  being  in  a  very  reduced  condi- 
tion, Congress  requested  the  States  to  furnish  supplies 
of  corn,  wheat,  and  flour.1  Virginia  was  requested  to 
furnish  twenty  thousand  barrels  of  Indian  corn,  and 
transport  it  to  certain  places  indicated  by  the  commis- 
sary-general;  while  the  Legislatures  of  Maryland  and 
other  States  were  requested  to  furnish  other  specific 
supplies.2  A  few  days  later,3  all  the  States  were  asked 
to  contribute  supplies;  and  each  one  was  at  liberty  to 
furnish  such  things  as  best  suited  its  convenience.  Sup- 
plies thus  furnished  were  credited  as  though  money 
had  been  advanced.  Clothing  also  was  seized ;  and,  hav- 
ing been  appraised,  Congress  ordered  payment  for  the 
amount.  Thus  the  year  ended  with  an  exhaustion  of 
the  paper-money  scheme ;  and  the  systems  of  seizure 
and  State  supplies  of  provisions  and  other  necessaries 
begun.  Severe,  indeed,  were  these  expedients;  yet  had 
not  Dionysius,  Lacheres,  Tachus,  and  other  Greek  leaders, 
seized  and  appropriated  the  wealth  of  the  heathen  tem- 
ples for  the  benefit  of  the  State  two  thousand  years 
before?  and  had  not  even  the  many-gifted  Pericles  ad- 
vised the  Athenians  to  remove  a  portion  of  the  gold 
which  covered  the  statue  of  Minerva  for  the  same  patri- 
otic purpose? 

1  Oct.  18.  2  Dec.  11.  8  Dec.  14. 


90  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1780. 


CHAPTER  VII. 

ADMINISTRATION  OF  THE  BOARD  OF  TREASURY. 
1780. 

Congress  ceased  to  issue  paper  money  when  it  became 
so  worthless  that  nothing  could  be  obtained  for  it  in 
exchange.  Without  question,  the  disastrous  consequences 
attending  the  use  of  paper  money  were  seen  a  long  time 
before  Congress  determined  to  limit  the  quantity  of  paper 
emissions.  Not  from  lack  of  wisdom,  but  from  necessity, 
did  Congress  continue  to  sow  unhealthy  seed  long  after 
it  was  known  what  manner  of  fruit  would  inevitably 
appear.  Money  must  be  had  from  some  source,  and  from 
this  a  supply  could  be  obtained,  though  deteriorating 
more  and  more  rapidly  in  quality.  During  these  troubled 
years  Congress  had  not  been  idle :  numerous  experiments 
had  been  devised  and  tried,  as  we  have  seen ;  and  Con- 
gress was  ever  ready  to  adopt  any  new  scheme  which 
gave  promise  of  relief.  It  must  be  borne  in  mind  how 
weak  Congress  was  in  authority  over  the  States;  not 
much  more  could  be  done  than  to  recommend  measures 
to  them  for  their  adoption.  Congress  could  not  appoint 
tax-gatherers,  and  send  them  forth  with  arbitrary  instruc- 
tions to  collect  taxes,  notwithstanding  the  urgency  of 
the  measure.  Such  an  exercise  of  power  on  the  part 
of  Congress  would  have  been  regarded  everywhere  as  an 


1780.]   ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  91 


usurpation,  and  would  not  have  been  tolerated  for  a 
moment.  All  that  Congress  could  do  had  been  done, 
namely,  to  recommend  taxation  to  the  States,  to  ask  for 
loans,  and  apportion  them  among  the  States  as  perfectly 
as  the  knowledge  of  the  members  would  permit.  Con- 
gress had  tried  to  borrow  money  at  home  and  abroad,  to 
raise  it  by  lottery,  and,  lastly,  it  was  found  necessary  to 
ask  the  States  to  furnish  specific  supplies  to  the  army 
to  prevent  the  troops  from  starving  or  disbanding.  This 
mode  of  obtaining  supplies  was  an  extremely  arbitrary 
one,  and  involved  the  government  in  a  fresh  set  of  evils. 
But  the  plan  found  many  eminent  advocates.  Not  the 
least  among  the  defects  of  the  scheme  arose  from  the 
distance  between  the  army  and  some  of  the  States  fur- 
nishing supplies,  the  transportation  of  which  cost  more 
than  they  were  worth  at  the  points  where  they  were  sent 
for  consumption.  Other  consequences  of  a  still  graver 
character  will  be  described  in  another  part  of  this 
narrative.1 

1  "The  present  mode  of  supplying  the  army  by  state  purchases," 
Hamilton  wrote  in  September,  1780,  "is  not  one  of  the  least  considerable 
defects  of  our  system.  It  is  too  precarious  a  dependence,  because  the 
states  will  never  be  sufficiently  impressed  with  our  necessities.  Each 
will  make  its  own  ease  a  primary  object,  the  supply  of  the  army  a 
secondary  one.  The  variety  of  channels  through  which  the  business 
is  transacted,  will  multiply  the  number  of  persons  employed,  and  the 
opportunities  of  embezzling  public  money.  From  the  popular  spirit  on 
which  most  of  the  governments  turn,  the  state  agents  will  be  men  of 
less  character  and  ability;  nor  will  there  be  so  rigid  a  responsibility 
among  them  as  there  might  easily  be  among  those  in  the  employ  of  the 
continent;  of  course  not  so  much  diligence,  care,  or  economy.  Yery 
little  of  the  money  raised  in  the  several  states  will  go  into  the  conti- 
nental treasury,  on  pretence  that  it  is  all  exhausted  in  providing  the 


92         FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1780. 


While  the  army  was  in  winter-quarters  at  Morristown, 
Hamilton  gave  the  first  proofs  of  his  great  genius  for 
finance,  which  were  so  strikingly  displayed  a  few  years 
later,  when  acting  as  the  chief  executive  of  the  treasury 
department.  He  addressed  a  lengthy  letter  to  Robert 
Morris,  in  which  the  causes  of  the  depreciation  of  paper 
money  were  discussed,  the  impossibility  of  obtaining  by 
taxation  all  the  means  needed  to  maintain  the  govern- 
ment, and,  consequently,  the  necessity  of  getting  pecun- 
iary assistance  from  other  nations.  He  next  proceeded 
to  consider  how  the  means  thus  acquired  should  be  em- 
ployed. Two  plans,  he  affirmed,  had  been  suggested; 
the  first  was  that  of  purchasing  the  paper  issued  by  the 
government,  a  plan  which  he  opposed  because  it  would 
cause  a  rapid  artificial  appreciation  of  the  paper;  while 
the  other  plan,  of  converting  the  loan  into  merchandise, 
and  importing  it  on  public  account,  though  less  objection- 
able than  the  other,  was,  after  all,  very  defective.  The 
plan  proposed  by  himself  was  to  establish  a  national 
bank,  the  details  of  which  were  carefully  sketched.  He 
also  affirmed  that  Congress  ought  immediately  to  appoint 
a  minister  of  finance,  and  closed  by  saying  that  he  should 
be  very  happy  to  hear  that  Congress  had  said,  "  Thou  art 
the  man." 1 

quotas  of  supplies,  and  the  public  will  be  without  funds  for  the  other 
demands  of  government.  The  expense  will  be  ultimately  much  greater, 
and  the  advantage  much  smaller.  We  actually  feel  the  insufficiency 
of  this  plan,  and  have  reason  to  dread,  under  it,  a  ruinous  extremity  of 
want."  (Ilist.  of  Repub.,  vol.  ii.  p.  94.)  Hamilton's  fears  were  well 
grounded ;  for  the  army  was  less  adequately  supplied  than  ever,  while 
the  system  imposed  so  much  discretionary  authority  upon  officials,  that 
corruption  among  them  became  still  more  prevalent. 
1  Works,  vol.  i.  p.  116. 


1780.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY. 


93 


The  letter  evinces  a  complete  grasp  of  the  situation, 
and  of  the  measures  necessary  to  extricate  the  country 
from  financial  peril.  The  financial  legislation  of  Con- 
gress, though  showing  considerable  fertility  of  plan,  was 
generally  tentative  and  narrow,  resting,  for  the  most  part, 
upon  no  broad  and  enduring  principles,  and  devised 
chiefly  for  the  present  exigency.  Among  so  many  blun- 
derers it  is  refreshing  to  see  a  mind  emerge  like  that  of 
Hamilton,  displaying  a  profound  mastery  of  the  situation. 

The  plan  of  calling  upon  the  States  for  specific  sup- 
plies, adopted  toward  the  close  of  1779,  was  resumed  in 
February  1  the  year  following.  A  more  minute  request 
was  made  to  the  States  for  certain  quantities  of  beef, 
rum,  salt,  hay,  flour,  corn,  pork,  &c.  For  the  articles 
thus  furnished,  the  States  were  to  be  credited  at  prices 
fixed  by  Congress,  and  the  taxes  which  they  had  been 
directed  to  pay  were  reduced  to  five  millions  in  conse- 
quence of  this  new  order,  though  this  latter  portion  of 
the  resolution  was  soon  after  repealed.  It  was  also 
determined  that  the  accounts  between  the  General  Gov- 
ernment and  the  States  should  "  be  kept  and  finally 
settled  in  Spanish  milled  dollars  and  the  balance  finally 
be  paid  in  specie." 

Massachusetts,  through  her  delegate  Gerry,2  found  fault 
with  this  apportionment,  deeming  the  burden  imposed 
upon  her  too  large  by  any  just  principle  of  assessment. 
She  had  willingly  contributed  freely  of  her  resources, 
and  at  last,  becoming  jealous  of  an  attempt  on  the  part 
of  the  other  members  of  the  Confederacy  to  load  her 
with  an  unreasonable  weight,  she  resolved  to  obtain 

1  Feb.  25.         2  See  Austin's  Life  of  Gerry,  vol.  i.  p.  319. 


94  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1780. 

some  relief.  The  discussion  that  followed  was  bitter  and 
protracted,  and  led  to  the  resignation  of  Gerry;  but 
finally  the  opposition  of  Massachusetts  died  away,  on 
account,  doubtless,  of  the  feeble  compliance  by  the 
States,  and  Massachusetts  among  the  rest,  of  the  resolves 
of  Congress.  Had  Massachusetts  been  compelled  to  exe- 
cute the  measure,  she  probably  would  have  sought  to 
abate  the  apportionment  before  making  any  more  contri- 
butions. 

Although  this  scheme  was  elaborated  with  considerable 
skill,  it  was  soon  found  to  be  impracticable ;  and  Congress 
evolved  another  measure,  fraught  with  the  gravest  conse- 
quences.1 This  was  nothing  less  than  a  redemption  of 
all  the  Continental  money  by  new  issues,  based  upon  the 
credit  of  the  States,  at  a  discount  of  forty  dollars  of  the 
old  emission  for  one  of  the  new.  Silver  and  gold,  also, 
were  to  be  receivable  at  the  same  rate,  and,  so  fast  as  the 
bills  were  presented  for  the  discharge  of  past  contracts, 
they  were  to  be  destroyed.  The  new  issue  was  not  to 
exceed  one-twentieth  part  of  the  nominal  value  of  those 
destroyed :  in  other  words,  was  not  to  exceed  ten  million 
dollars.  They  were  redeemable  within  six  years,  and 
bore  interest  at  the  rate  of  five  per  cent  per  annum, 
which  was  to  be  paid  at  the  time  of  redeeming  the  bills, 
or,  "  at  the  election  of  the  holder,  annually,  at  the  respec- 
tive Continental  loan  offices,  in  sterling  bills  of  exchange, 
drawn  by  the  United  States  on  their  Ministers  in  Europe, 
at  4:8.  6d.  sterling  per  dollar."  It  was  further  provided, 
that,  in  case  any  State  was  incapable,  by  the  events  of 
war,  from  redeeming  those  emitted  upon  its  credit,  the 

i  March  18. 


1780.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  95 


United  States  were  to  pay  them ;  which  undertaking  was 
to  be  indorsed  thereon.  The  face  of  this  new  emission 
read  as  follows :  — 

The  possessor  of  this  bill  shall  be  paid  Spanish 
milled  dollars  by  the  31st  day  of  December,  1786,  with  in- 
terest, in  like  money,  at  the  rate  of  five  per  cent,  per  annum 
by  the  State  of  according  to  an  Act  of  the  Legislature 

of  the  said  State  of  the       day  of  ,  1780. 

Accompanied  with  the  following  indorsement :  — 

The  United  States  insure  the  payment  of  the  within  bill, 
and  will  draw  bills  of  exchange  for  the  interest  annually  if 
demanded,  according  to  a  resolution  of  Congress  on  the  18th 
day  of  March,  1780. 

The  new  bills  were  struck,  under  the  direction  of  the 
Board  of  Treasury,  in  due  proportion  for  the  several 
States,  determined  by  their  monthly  quotas,  and  were 
lodged  in  the  Continental  loan-offices ;  but  they  were  to 
be  issued  only  in  proportion  of  one  to  twenty  of  other 
bills  returned  and  destroyed.  Six-tenths  of  the  quantity 
issued  were  to  be  used  by  the  States;  the  balance  was 
to  be  sent  to  the  Board  of  Treasury  for  general  use.1 
The  States  were  also  directed  to  raise  a  sum  sufficient  to 
sink  or  redeem  one-sixth  part  of  the  whole  amount  every 
year.  Congress,  hopeful  of  every  new-born  plan,  notwith- 
standing the  fearful  shock  given  to  the  public  from  the 
issue  of  so  much  paper  money,  had  at  least  one  member, 
Ellsworth  of  Connecticut,  who  was  sanguine  concerning 
the  measure,  if  the  States  could  only  be  induced  to 
do  their  duty.    In  his  letter  to  Gov.  Trumbull,2  he  de- 

1  Funding  System,  p.  73.   2  Hamilton,  Hist,  of  Repub.,  vol.  ii.  p.76. 


96  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1780. 

clares :  "  This  is  precisely  the  point  of  time  for  the 
several  Legislatures  to  act  decidedly,  and  in  a  manner 
that  the  world  will  forever  call  wise.  It  is  now  in  their 
power  by  a  single  operation  to  give  a  sure  establishment 
for  public  credit;  to  realize  the  public  debt  at  its  just 
value ;  and  without  adding  to  the  burdens  of  the  people, 
to  supply  the  Treasury."  "  This  measure,"  justly  re- 
marks a  writer,  "  from  which  so  much  was  expected,  was 
entirely  in  a  wrong  direction.  It  was,  however,  in  the 
spirit  of  the  new  articles  of  confederation,  and  substituted 
the  credit  of  the  States  with  a  mere  illusory  ultimate 
pledge  for  that  of  the  Union." 

An  Act  of  so  grave  a  character,  as  may  easily  be  im- 
agined, could  not  be  passed  without  creating  much 
excitement  among  the  people.  By  many  it  was  heartily 
approved ;  while  others  condemned  it  in  unsparing  terms. 
It  met  with  approval  in  Connecticut,  as  did  also  the 
plan  previously  adopted  by  Congress,  asking  the  States 
for  specific  supplies.  The  merchants  of  Hartford  issued 
an  address  declaring,  that  notwithstanding  the  losses 
they  had  sustained  by  sea,  the  depreciation  of  Conti- 
nental currency,  and  the  receiving  of  payment  of  many 
debts  at  a  nominal  sum,  they  were  willing  and  determined 
to  sell  their  merchandise  to  the  public  at  the  rates  affixed 
by  Congress,  and  to  receive  the  new  emissions  therefor, 
"  having  a  firm  reliance  that  the  bills  will  be  punctually 
and  justly  redeemed.  And  we  do  assure  ourselves  that 
our  brethren,  the  farmers  and  tradesmen,  will  be  as 
ready  as  we  are  to  furnish,  in  the  same  manner  we  do, 
their  produce  and  manufactures,  as  we  believe  a  spirit  of 
harmony  and  friendship  is  like  to  prevail  between  the 


1780.1    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  97 


trade  and  landed  interest,  and  that  all  orders  of  men  in 
this  State  are  resolved  immediately  to  contribute  all  in 
their  power  to  furnish  supplies  for  the  armies  of  the 
United  States,  and.  to  continue  these  supplies  to  the  end 
of  the  war."  As  further  proof  of  their  good  intentions, 
the  merchants  besought  the  Assembly  to  direct  the  "pur- 
chasing commissary  "  to  purchase  such  things  as  they  had 
at  their  disposal,  in  order  to  show  their  willingness  to 
comply  with  the  action  of  Congress  and  of  the  State.1 

Two  months  after  the  Act  was  passed,  at  a  public 
meeting  in  Philadelphia,  a  German  said,2  "I  am  near 
seventy  years  of  age,  I  have  a  large  family  of  children  to 
provide  for,  a  great  part  of  my  property  has  been  sold 
long  since  for  Continental  money,  which  I  have  kept  by 
me  in  confidence  it  would  have  been  redeemed  at  the 
value  I  received  it;  but  I  am  disappointed  and  ruined. 
My  loss  is  very  heavy,  and  it  greatly  afflicts  me ;  yet  the 
insolent  triumph  of  my  disappointed  neighbors  wounds 
me  still  more  deeply,  but  I  will  never  forsake  the  cause 
of  liberty  and  turn  Tory;  if  I  die  of  a  broken  heart,  I 
will  die  a  friend  of  my  country."  This  was  an  exhibi- 
tion of  patriotism  rivalling  that  displayed  by  Greece  and 

1  Penn.  Packet,  May  6,  1780.  Gerry  wrote  to  John  Adams,  May  5, 
1780:  "The  resolutions  of  congress  for  calling  in  and  cancelling  the  two 
hundred  millions  of  dollars  emitted  by  them,  have  in  general  been  well 
received.  The  depreciation  is  stopped,  and  specie,  which  before  the 
passing  of  the  resolves,  was  sold  for  upwards  of  seventy  for  one,  is  now 
current  at  sixty,  and  has  been  lately  at  fifty-five.  The  advantage  of 
this  plan  will  be  great  to  the  landholder,  inasmuch  as  the  national  debt, 
including  certificates  and  foreign  demands,  does  not  now  much  exceed 
five  millions  sterling."  —  J.  Adams's  Works,  vol.  vii.  p.  188. 

2  Penn.  Packet,  May  9,  1780. 


98  FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1780. 

Rome  in  the  height  of  their  glory,  and  which  was  a 
mighty  force  in  sustaining  the  anxious  leaders  of  the 
infant  republic.  This  German,  whose  name  is  lost  to 
us,  expressed  the  sentiments  of  many  others  who  were 
injured  or  ruined  by  the  forty-for-one  Act,  but  who, 
nevertheless,  retained  their  devotion  to  their  country. 

In  August,  Gen.  Armstrong,1  a  very  intelligent  ob- 
server, wrote  to  a  friend,  "  How  the  scheme  of  business 
and  finance  contained  in  the  resolution  of  the  18th  of 
March  last  will  operate  for  our  relief  is  yet  uncertain 
but  doubted  by  too  many ;  for  altho'  it  is  considered  by 
many  good  judges  to  be  at  once  just  and  wise  respecting 
the  public  at  large,  yet  various  individuals  suppose  them- 
selves injured  or  disappointed  by  fixing  the  money  at 
forty  to  one,  and  therefore  decry  the  measure."  In  a 
subsequent  chapter  the  effects  of  the  Act  will  be  more 
minutely  traced. 

Two  days  after  the  Act  was  passed,  the  States  were 
recommended  to  revise  their  laws,  making  Continental 
bills  of  credit  a  tender  in  discharge  of  debts  and  con- 
tracts, and  "  to  amend  the  same  in  such  manner  as  they 
shall  judge  most  conducive  to  justice  in  the  present  state 
of  paper  currency." 

It  was  not  long  before  the  States  were  asked  to  pay 
into  the  Continental  treasury  ten  million  dollars,  for  the 
purpose  of  bringing  the  army  into  the  field,  and  of  fur- 
nishing it  with  supplies.2  This  sum  was  to  be  credited 
to  the  States  on  their  quotas  then  due  to  the  govern- 

1  He  wrote  from  Philadelphia,  Aug.  3,  Hist.  Mag.  vol.  viii.  p.  16, 
1864. 

2  May  19. 


1780.]   ADMINISTRATION  OF  THE  BOARD  OF  TREASURY. 


99 


ment.  At  the  same  time,  the  Board  of  Treasury  were 
directed  to  draw  bills  on  Dr.  Franklin  for  twenty-five 
thousand  dollars,  and  upon  Mr.  Jay  for  a  similar  sum, 
which  were  to  be  sold  in  Massachusetts,  Rhode  Island, 
Connecticut,  Pennsylvania,  Maryland,  and  Virginia.  If 
more  supplies  were  needed  from  the  States  than  those 
specified  in  a  previous  resolve,  they  were  to  be  taken  by 
a  committee  appointed  for  that  purpose,  upon  the  advice 
of  the  commander-in-chief  of  the  army,  and  with  the 
consent  of  the  legislative  or  executive  power  of  the 
States.  The  committee  also  were  to  give  assurance,  that, 
for  the  things  thus  "  purchased  or  otherwise  procured  on 
the  credit  of  the  United  States,"  their  true  value  was  to 
be  paid,  "with  interest  at  six  per  cent  as  fast  as  money 
can  be  raised  for  that  purpose." 1  Certificates  given  in 
this  way  multiplied  rapidly ;  yet,  as  they  were  receivable 
for  taxes,  the  loss  was  not  total  in  receiving  them. 

The  condition  of  the  army  in  respect  to  subsistence 
and  payment  was  more  critical  now  than  at  any  former 
period  of  the  war.2    The  officers  and  men  had  not  been 

1  June  1. 

2  Charles  Petit,  acting  quartermaster-general,  wrote  from  Philadel- 
phia, July  13,  1780:  "The  Continental  Treasury  is  wretchedly  poor,  and 
affords  so  little,  or  at  least  so  little  comes  from  it  to  me,  that  I  have  no 
money  at  command  on  the  most  pressing  emergencies"  (Greene's 
Life  of  Greene,  vol.  ii.  p.  313).  Hamilton  wrote  in  December,  from 
Morristown,  "  I  find  our  prospects  are  infinitely  worse  than  they  have 
been  at  any  period  of  the  war,  and  unless  some  expedient  can  be  in- 
stantly adopted,  a  dissolution  of  the  army  for  want  of  subsistence  is 
unavoidable.  A  part  of  it  has  been,  again,  several  days  without  bread, 
and  for  the  rest,  we  have  not,  either  on  the  spot  or  within  reach,  a 
supply  sufficient  for  four  days.  Nor  does  this  deficiency  proceed  from 
accidental  circumstances,  as  has  been  the  case  on  former  occasions,  but 


100        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1780. 

paid  for  several  months,  and,  even  when  they  were,  the 
money  received  was  only  such  in  name.  All  the  efforts 
to  induce  the  States  to  forward  supplies  proved  nearly 
fruitless,  and  several  officers  were  compelled  to  resign 
their  commissions.  Washington  feared  the  loss  of  many 
officers  of  rare  experience  and  value,  and  he  exerted 
himself  to  the  utmost  to  persuade  Congress  to  grant 
relief.  When  all  hope  seemed  to  have  fled,  the  citizens 
of  Philadelphia  formed  an  association  to  procure  a  supply 
of  articles  for  the  suffering  soldiers. 

When  the  spirit  of  the  Roman  Government,  near  the 
close  of  the  first  Punic  war,  grew  faint,  as  the  resources 
of  the  nation  began  to  fail,  the  citizens  awoke,  and 
voluntarily  gave  the  government  money  enough  to  build 
and  equip  a  new  fleet,  with  which  a  decisive  victory  was 
won:  so  now,  when  the  prospect  was  cheerless,  as  the 
means  to  continue  the  war  seemed  to  be  nearly  spent, 
the  ladies  of  Philadelphia  inspired  a  new  hope  by  making 
a  generous  contribution  for  the  relief  of  the  suffering 
soldiers.  This  movement  roused  the  other  sex  to  put 
forth  a  still  greater  effort  in  the  same  direction.  When 
their  plan  was  perfected,  Congress  was  informed  by 
letter 1  of  the  creation  of  a  bank  for  the  purpose  of 
assisting  the  government,  and  of  the  desire  on  the  part 
of  the  directors  to  confer  with  a  committee,  appointed 
by  Congress,  upon  the  subject.  Gladly  complying  with 
the  request,  the  committee  reported  to  Congress  the 

from  the  absolute  emptiness  of  our  magazines  everywhere,  and  the  total 
want  of  money  or  credit  to  replenish  them.  We  have  never  experienced 
a  like  extremity  at  any  period  of  the  war."  —  Hist,  of  Repub.,  vol.  i. 
p.  556. 

1  June  21. 


1780.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  101 

next  day  the  end  sought  to  be  accomplished :  it  was  to 
supply  three  million  rations  and  three  hundred  hogs- 
heads of  rum  to  the  army,  with  the  expectation  of  re- 
ceiving a  re-imbursement  from  foreign  loans.  As  the 
bank  expected  to  make  nothing  out  of  the  enterprise, 
but  acted  purely  from  patriotism,  Congress  pledged  the 
faith  of  the  United  States  to  the  subscribers  of  the  bank 
for  their  indemnity ;  and  the  Board  of  Treasury  were 
directed  to  deposit  therein  bills  of  exchange  to  the 
amount  of  a  hundred  and  fifty  thousand  pounds,  to 
secure  the  bank  in  this  undertaking.1  If  occasional 
assistance  were  needed,  Congress  promised  to  advance 
as  much  as  could  be  spared  from  other  sources.  The 
amount  contributed  in  this  way  in  gold  and  silver  was 
two  hundred  and  sixty  thousand  pounds.2 

A  financial  picture  drawn  at  that  time  by  Gen.  Cornell,3 
in  Philadelphia,  is  not  less  true  than  startling:  "The 
situation  of  our  finances  is  such  as  to  make  every  think- 
ing man  shudder.  The  new  money  ordered  into  circula- 
tion by  the  resolution  of  the  18th  of  March  meets  with 
so  many  obstructions  I  almost  despair  of  the  credit  it 
will  have  in  the  States  that  comply  with  the  resolution. 
If  that  should  fail,  good  God,  what  will  be  our  fate, 
without  money  or  credit  at  home  or  abroad  ?  We  have 
not  one  farthing  of  money  in  the  Treasury,  and  I  know 
of  no  quarter  from  which  we  have  a  right  to  expect  any. 
Yet  we  go  on  contented,  pleasing  ourselves  with  the 

1  June  22. 

2  Niles's  Princ.  and  Acts  of  the  Rev.,  p.  236.  Robert  Morris  sub- 
scribed ten  thousand  pounds. 

8  Letter  to  Gen.  Greene,  Aug.  13,  1780,  Greene's  Life  of  Greene,  vol. 
ii.  p.  323. 


102 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1780. 


sanguine  hopes  of  reducing  New  York.  I  have  seen 
many  new  scenes  before  I  came  to  this  place.  But  what 
I  have  experienced  since,  exceeds  any  thing  I  have  ever 
seen  before.  I  never  before  saw  a  set  of  men  that  could 
quietly  submit  to  every  kind  of  difficulty  that  tended  to 
the  ruin  of  their  country,  without  endeavoring  to  make 
one  effort  to  remove  the  obstruction.  I  believe  they  wish 
their  country  well,  but  suffer  their  time  almost  wholly 
to  be  taken  up  in  business  of  no  consequence.'' 

By  the  last  of  August,1  paper  money  had  become  so 
unpopular,  that  the  quartermaster  and  commissary-gen- 
eral were  directed  to  issue  all  certificates  thereafter  for 
specie,  "  or  other  current  money  equivalent,"  which  were 
to  bear  interest  at  six  per  cent,  from  the  time  stipulated 
for  their  payment,  until  paid.  Such  action  was  taken  in 
conformity  with  Pickering's  suggestion.2  But  this  meas- 
ure of  giving  certificates,  as  already  shown,  was  fraught 
with  the  gravest  dangers :  it  could  not  be  justified,  save 
upon  the  extreme  ground  of  necessity.  The  State  agents 
were  required 3  to  transmit  to  the  commander-in-chief,  as 
well  as  to  the  commissary-general,  monthly  returns  of 
the  provisions  coming  into  their  hands,  and  the  States 
were  recommended  to  compel  a  prompt  obedience  of  the 
order ;  yet  the  agents  were  exceedingly  remiss  in  comply- 
ing, and  the  States  did  nothing  in  the  way  of  compelling 
them  to  make  returns.  Congress  soon  learned  some  of 
the  difficulties  growing  out  of  the  use  of  these  certifi- 
cates; for  it  was  affirmed,  in  a  letter  sent  to  the  States 
not  long  afterward,  that  "  they  continue  to  obstruct  every 

1  Aug.  23,  20.         2  Pickering's  Life  of  Pick.  vol.  i.  p.  255. 
8  Oct.  24. 


1780.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  103 

plan  which  hath  been  devised  for  restoring  public  credit 
and  supporting  the  war."  1 

On  the  5th  of  September,  another  loan  of  a  million 
dollars  in  specie  value  was  offered  to  the  public.  From 
this  time  henceforth,  all  moneys  loaned  were  received  at 
a  specie  valuation. 

The  final  measure  of  the  year,  of  a  financial  nature, 
was  a  recommendation  to  the  States  to  levy  a  tax  equal 
in  value  to  six  million  silver  dollars,  to  be  paid,  partly  in 
specific  articles  at  prices  fixed  in  the  Act  itself,  and  the 
balance  in  gold  and  silver,  or  bills  of  credit  of  the  new 
emission.2  Previous  to  this  time,  New  Hampshire,  Massa- 
chusetts, Connecticut,  and  other  States,  had  been  re- 
quested to  furnish  supplies  for  the  army.3 

Congress,  amid  very  many  trials,  succeeded  in  pull- 
ing the  country  through  another  year  of  war.  It  is 
wonderful  how  much  the  army  endured ;  yet  soldiers  and 
officers  neither  fainted  nor  faltered,  though  desertions 
were  not  infrequent.  Perhaps  more  suffering  was  expe- 
rienced from  lack  of  funds  than  from  any  other  cause ; 
still  it  is  impossible  to  describe  the  evil  consequences  of 
a  constantly  depreciating  money  which  unsettled  values, 
and  embarrassed  all  exchange. 

Throughout  the  year,  Congress  was  constantly  adjust- 
ing salaries  and  accounts  to  prevent  losses  by  the  depre- 
ciation of  paper  money.4  The  adjustment  of  interest  on 
public  loans  was  the  most  serious  question  with  which 
Congress  wrestled.    How  could  lenders  be  compensated, 

1  Jan.  15,  1781.  2  Nov.  4.  8  Sept.  15,  19,  21. 

4  See  especially  the  action  of  Congress,  Dec.  31,  1779,  Jan.  1,  15,  27, 
of  the  following  year. 


104        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1780. 

without  loss  either  to  themselves  or  to  the  government  ? 
It  was  finally  determined  to  pay  them  in  hard  money, 
giving  each  creditor  as  much  as  his  paper  money  was 
worth  at  the  time  the  government  received  it.1  But  how 
was  the  scale  of  depreciation  to  be  ascertained  ?  All  was 
uncertainty,  and  no  fixed  rule  prevailed  anywhere.  "  A 
progressive  rule  of  depreciation "  was  finally  evolved, 
though  there  is  good  reason  for  doubting  whether,  in  the 
application  of  it,  much  clamor  did  not  arise. 

While  Congress  was  so  seriously  pressed  for  funds,  the 
country  was  literally  overrun  with  cash.  The  English 
and  French  armies  kad  brought  large  sums ;  a  considera- 
ble quantity  also  had  come  from  Havana.  Says  a  writer, 
whose  statement  there  is  no  reason  for  questioning,  "hard 
money  was  never  more  plenty  or  more  easily  collected 
than  at  that  time."  2 

Congress  had  done  much  in  methodizing  business.  Ac- 
counts were  more  regularly  kept,  even  if  there  were 
funds  enough  to  discharge  only  a  small  portion  of  them. 
Especially  with  respect  to  the  affairs  of  the  army,  Con- 
gress passed  a  large  number  of  resolves,  the  chief  purpose 
of  which  was  to  introduce  a  more  systematic  and  econom- 
ical mode  of  administering  the  various  departments. 
1  June  28.  2  Webster,  Political  Essays,  p.  75,  note. 


1781.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  105 


CHAPTER  VIII. 

ADMINISTRATION  OF  THE  BOARD  OF  TREASURY. 
1781. 

The  first  financial  act  of  the  new  year  related  to  the  pay- 
ment of  loan-office  certificates  to  the  "  fortunate  adventur- 
ers," as  they  were  called,  in  the  third  class  of  the  lottery,1 
whose  inception  has  been  noted  in  a  previous  chapter. 

More  than  four  years  had  passed  since  the  adoption  of 
the  lottery  scheme ;  but,  like  most  of  the  financial  experi- 
ments of  Congress,  only  scanty  fruit  had  appeared.  After 
many  delays,  the  several  drawings  occurred,  though  the 
tickets  of  neither  class  were  all  sold.  In  payment  of 
the  first  class  of  billets,  treasury  bank-notes  were  issued, 
which  was  the  introduction  of  a  new  financial  measure. 
The  following  was  the  form  of  note  given :  — 

Number  Dollars  Number. 

Dollars. 

The  United  States  of  America  acknowledge  themselves  to 
be  indebted  to  in  dollars,  for  a  prize 

of  that  value,  drawn  in  the  United  States'  lottery,  which 
they  promise  to  pay  to  the  said  or  bearer, 

§j  |   on  the  day  of  with  interest  annually,  at 

|  g   the  rate  of  four  per  cent  agreeable  to  a  resolution  of 
g      the  United  States  passed  the  18th  day  of  November, 
1776. 

1  Jan.  2. 


106        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 


They  were  signed  by  the  treasurer  or  his  son,  and  coun- 
tersigned by  one  of  the  managers  of  the  lottery ;  while 
other  regulations  were  added  in  respect  to  numbering 
and  distributing  the  notes.1  Afterward  the  rate  of  in- 
terest was  raised  to  six  per  cent2  upon  all  certificates 
issued  for  prizes;  and  the  "fortunate  adventurers"  in  the 
second  class,  who  had  drawn  more  than  five  thousand 
dollars  each,  were  required  to  wait  five  years  before 
receiving  their  money.3  Like  most  of  the  business  of 
Congress,  the  accounts  of  the  lottery  became  confused; 
and  it  was  finally  resolved  to  receive  the  tickets  as 
vouchers  for  the  prizes  drawn,  and  to  "  certify  the  same 
as  debts  of  the  United  States  at  and  after  the  rate  of  one 
dollar  in  specie  for  every  forty  dollars  for  such  prizes,"  4 
—  an  end  doubtless  disappointing  to  the  ticket-holder,  but 
not  in  the  least  to  the  reader  who  has  traced  the  perpetu- 
ally failing  plans  of  Congress. 

On  the  middle  of  January,  Congress  issued  an  address5 
to  the  States,  which  was  chiefly  a  review  of  the  events  of 
the  year,  and  an  appeal  to  put  forth  greater  exertions 
in  the  future.  The  States  were  asked  to  send  $879,342 
in  specie,  —  one-half  without  the  least  delay,  and  the  re- 
mainder by  the  1st  of  April,  —  to  pay  the  armies,  and  to 
provide  for  carrying  on  the  war.  To  what  small  figures 
did  the  estimates  of  Congress  shrink  as  soon  as  specie 
was  restored ! 

Having  repudiated  their  promises  once  on  a  grand 
scale,  Congress  came  very  near  repeating  the  act  not  long 
afterward.     Paper  money  having  ceased  to  circulate, 

i  May  14,  1777.  2  May  2,  1778.  8  Oct.  30,  1779. 

4  Dec.  21,  1732.  6  Jan.  15. 


1781.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  107 


Congress  sought  to  establish  specie  prices.  But  the  legis- 
lation of  that  body  was  not  altogether  consistent;  and 
soon  a  grave  question  arose.  On  the  11th  of  July,  1780, 
Congress  resolved  to  pay  the  officers  and  men  in  the 
navy  "in  specie,  or  other  money  equivalent,"  and  four 
days  afterward  the  resolve  was  extended  to  the  pay  of 
the  army.  Notwithstanding  the  obvious  meaning  of  these 
acts,  which  were  not  open  to  misconstruction,  Congress, 
toward  the  close  of  that  year,  resolved  that  the  salaries  of 
certain  civil  officers,  which  had  been  made  payable  also 
"  in  specie  or  other  current  money  equivalent,"  should  be 
paid  in  bills  of  credit  of  the  new  emission.2 

Naturally,  such  a  deliberate  infringement  of  law  would 
create  the  suspicion  that  other  officials  also,  beside  those 
holding  civil  positions,  might  be  treated  in  like  manner. 
Pickering,  who  was  then  quartermaster-general,  accord- 
ingly wrote  to  the  president  of  Congress  upon  the  subject ; 
but  receiving  no  satisfactory  answer,  if  any  whatever,  re- 
paired to  Philadelphia,  and  wrote  another  letter,  in  which 
he  said  it  did  appear  to  him  "  indispensably  necessary  to 
come  to  a  decision."  "Trusting  to  the  plain  obvious 
meaning  "  of  the  resolves  of  Congress,  he  had  "  ventured 
to  assure  the  persons  concerned,  that  the  moneys  promised 
to  be  paid  in  specie  or  other  current  money  equivalent 
would  really  be  so  paid,  and  that  no  bills  of  credit  should 
ever  be  tendered  to  them  as  such  equivalent,  unless  they 
were  current  among  the  people  at  the  rate  of  specie." 

1  "Public  credit  is  so  totally  lost,"  writes  Greene  to  Hamilton,  the 
10th  of  January  of  this  year,  "that  private  people  will  not  give  their 
aid,  though  they  see  themselves  involved  in  one  common  ruin."  — Ham. 
Hist,  of  Repub.  vol.  ii.  p.  164. 

2  Sept.  13,  25,  and  Nov.  15,  1780. 


108        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 


By  these  assurances  he  had  been  able  to  organize  the 
department,  and  to  issue  some  certificates  in  lieu  of 
money.  But,  as  doubts  disquieted  the  minds  of  many, 
he  requested  of  Congress  an  explanation  of  the  words  in 
question.  Even  were  Congress  to  declare  in  the  most 
candid  and  explicit  terms,  that  the  salaries  of  persons  in 
his  department,  and  the  specie  contracts  they  had  made, 
should  be  paid  in  gold  and  silver,  or  other  money  equiva- 
lent, still  he  affirmed  that  he  should  be  embarrassed ;  for 
the  tender  laws  hung  over  his  head,  which  threatened 
severe  penalties  if  he  attempted  to  act  honestly  by  rating 
the  current  paper  money  at  its  just,  instead  of  its  legal 
value.  Yet  there  was  not  a  single  member  of  any  public 
body  in  America  who  would  accept  a  paper  dollar  of  the 
new  emission  as  an  equivalent  to  a  silver  dollar.  But  a 
public  officer  must  tender  it  as  such.  "Hard  condition 
to  an  honest  man  engaged  in  the  service  of  his  country ! 
Why  such  a  man,  in  his  public  office,  should  be  obliged 
to  do  what,  in  his  own  private  affairs,  he  would  be 
ashamed  of,  I  know  not.  Credit,  or  the  reputation  of 
integrity  and  good  faith,  is  alike  essential  to  the  public  as 
to  an  individual." 

In  such  plain  terms  did  Pickering 1  show  the  ill  effects 
of  tampering  with  the  public  faith.  His  letter  attracted 
general  attention.  The  majority  of  Congress  were  will- 
ing to  settle  the  question  fairly ;  but  a  timidity  was 
exhibited  against  going  to  the  bottom  of  the  matter. 

Thus  declared  Pickering  to  his  wife,  six  days  after 
writing  the  foregoing  letter,2  adding,  "  'Tis  time  to  have 

1  March  3,  1781,  Pickering's  Life  of  Pick.,  vol.  i.  p.  277. 

2  March  9,  Ibid.,  p.  281. 


1781.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  109 

done  with  patchwork.  We  have  been  nearly  ruined  by- 
it  already."  Pickering's  appeal  was  not  in  vain;  for  in 
a  short  time  Congress  settled  the  question  in  favor  of 
honesty  as  well  as  expediency. 

Congress  now  earnestly  endeavored  to  remodel  the 
various  departments  of  government.  Too  long  had  the 
work  been  delayed.  The  inefficiency  of  the  machinery 
of  the  Board  of  Treasury  was  apparent,  while  other 
departments  were  in  even  greater  need  of  re-organization. 
The  Treasury  Board,  then  existing,  had  acted  more  effi- 
ciently than  any  previous  organization  for  administering 
the  affairs  of  the  treasury  department ;  but  the  members 
were  exceedingly  slow,  as  every  one  having  any  thing  to 
do  with  them  had  learned  by  experience. 

So  Congress  resolved  to  try  another  plan,  the  leading 
features  of  which  had  been  previously  sketched  by  Ham- 
ilton in  his  letter  to  Morris.1  It  was  resolved 2  to  replace 
the  Board  of  the  Treasury  with  a  superintendent  of 
finance,  whose  duty  should  be  to  examine  into  the  public 
indebtedness  and  revenues ;  to  digest  and  report  plans 
for  improving  and  regulating  the  finances,  and  to  estab- 
lish order  and  economy  in  the  expenditure  of  the  public 
money;  to  direct  the  execution  of  all  plans  that  should 
be  adopted  by  Congress  respecting  revenues  and  ex- 
penditure; to  superintend  and  control  the  settlement  of 
all  public  accounts;  to  direct  and  control  all  persons 
employed  in  procuring  supplies  for  the  public  service 
and  in  the  expenditure  of  public  money;  to  obtain 
accounts  of  all  the  issues  of  specific  supplies  furnished 
by  the  States;  to  compel  the  payment  of  all  moneys 


1  Ante,  p.  92. 


2  Feb.  7. 


110        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 


due  to  the  United  States,  and  to  prosecute  all  delin- 
quences  respecting  the  public  revenues  and  expenditures ; 
and  to  report  to  Congress  the  officers  necessary  to  assist 
him  in  the  various  branches  of  his  department.  To  fill 
this  office  Congress  wisely  selected  Robert  Morris,1  who 
had  developed  greater  financial  capacity  than  any  other 
man  of  his  time. 

Thus  Congress,  after  a  series  of  costly  experiments, 
determined  to  place  the  financial  department  of  the 
government  into  the  hands  of  a  single  man,  —  a  step 
which  Hamilton  and  other  leading  spirits  of  the  Revo- 
lution had  long  and  earnestly  contended  was  absolutely 
necessary  for  the  successful  administration  of  the  finances. 
France  had  passed  through  a  somewhat  similar  experience 
nearly  two  centuries  before,  and,  the  same  remedy  having 
been  devised,  the  finances  were  put  under  the  control  of 
the  honest  and  devoted  Sully.  The  French  minister, 
entering  on  his  extremely  difficult  task  with  a  zeal  as  rare 
as  it  is  worthy  of  all  praise,  succeeded  in  uprooting  the 
numerous  thieves,  who  for  a  long  period  had  been  en- 
riching themselves  and  their  friends  at  the  expense  of  the 
State  ,  and  by  his  wise  economy  the  heavy  cloud  of  a  huge 
national  debt,  which  hung  over  his  head  in  the  beginning 
of  his  administration,  disappeared,  and  when  he  retired 
from  his  post  there  was  a  large  balance  to  the  credit  of 
the  government  in  the  treasury.  Would  Morris  be  as 
successful  in  his  new  sphere  as  had  been  his  great 
exemplar?  Not  less  honest  and  patriotic  than  Sully, 
Morris's  achievements  fully  justified  the  action  of  Con- 
gress. 

1  Feb.  20. 


1781.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  HI 

As  Morris  did  not  accept  the  office  at  once,  the  Board 
of  Treasury  continued  to  administer  the  finances  of  the 
government.  Bills  of  exchange  were  struck 1  for  the 
payment  of  interest  to  all  the  holders  of  loan-office 
certificates  entitled  thereto,  although  somewhat  different 
provision  was  made  in  respect  to  the  certificates  issued 
from  the  loan-offices  in  South  Carolina  and  Georgia;2 
while  warrants  were  issued  upon  loan-offices  in  seven  of 
the  most  Northern  States  to  pay  in  bills  of  the  new  emis- 
sion the  soldiers  in  those  sections  of  the  country.3  The 
commissioners  of  all  the  loan-offices  were  directed4  to 
exchange  with  the  treasurers  of  their  respective  States 
bills  of  credit  of  the  old  emission  coming  into  their 
hands  uby  the  sale  of  bills  of  exchange,  or  on  loan  for 
bills  of  credit  of  the  new  emissions,  issued  in  the  same 
State,"  for  the  purpose  of  retiring  the  paper  money 
belonging  to  the  old  emission  as  early  as  possible.  It 
was  also  resolved5  that  all  debts  due  from  the  United 
States,  which  had  been  liquidated  in  specie  value,  and  all 
debts  payable  in  the  same  manner,  should  be  thus  paid, 
or  in  other  money  equal  thereto,  according  to  the  cur- 
rent exchange.  The  States  were  also  recommended  to 
amend  their  laws  making  the  bills  of  credit  emitted 
under  the  authority  of  Congress  a  legal  tender,  so  as  to 
prevent  their  use  in  this  manner,  except  at  their  current 
value  compared  with  gold  and  silver. 

It  was  during  this  period,  prior  to  Morris's  acceptance, 
that  the  Articles  of  Confederation  between  the  several 
States  were  executed.  This  was  an  important  event,  for 
by  them  additional  power  was  conferred  upon  the  General 

1  Feb.  23.     2  March  29.     3  Feb.  28.     *  April  14.     5  March  16. 


112        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 

Government.  Let  us  glance  at  the  financial  features  of 
these  articles.  All  charges  of  war,  and  other  expenses 
incurred  for  the  common  defence  or  general  welfare,  were 
to  be  defrayed  out  of  a  common  treasury,  and  no  treaty 
of  commerce  could  be  made  restraining  the  legislative 
power  of  the  States  from  imposing  such  imposts  on  for- 
eigners as  their  own  people  were  obliged  to  pay  to  other 
countries,  or  from  prohibiting  the  exportation  or  impor- 
tation of  any  commodities  whatever.  The  regulation  of 
the  coinage,  weights  and  measures,  were  to  be  given  to 
Congress,  besides  power  to  borrow  money  or  emit  bills 
of  credit;  and  all  bills  of  credit  emitted,  moneys  bor- 
rowed, and  debts  contracted  by  authority  of  Congress, 
before  the  assembling  of  the  States  under  the  new  Con- 
federation, were  to  be  deemed  a  charge  against  the  United 
States,  for  payment  whereof  they  and  the  public  faith 
were  pledged.1 

Thus,  after  many  delays,  the  States  yielded  some  of 
their  powers  in  order  to  strengthen  the  General  Govern- 
ment ;  yet  it  was  still  too  weak  to  be  very  effective. 
Months  had  passed  between  the  proposal  to  form  a 
stronger  confederacy  and  the  consummation  of  that 
object,  and  in  the  mean  time  Congress  had  tried  several 
times  to  obtain  smaller  grants  of  power  to  collect  a 
revenue  from  the  States,  but  in  vain. 

On  the  13th  of  March,2  Morris  wrote  a  letter  to  Con- 
gress, informing  that  body  how  fully  he  realized  the  high 
honor  conferred  upon  him,  but  also  that  he  was  con- 
cerned with  other  persons  "  in  certain  commercial  estab- 
lishments "  which  he  was  bound  in  honor  and  by  contracts 

i  Ratified  March  1.  2  Dip.  Cor.,  vol.  xi.  p.  348. 


1781.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  113 

to  support.  "  If,  therefore,"  he  continues,  "  it  be  the 
idea  of  Congress,  that  the  office  of  superintendent  of 
finance  is  incompatible  with  commercial  concerns  and 
connections,  the  point  is  settled;  for  I  cannot  on  any 
consideration  consent  to  violate  engagements  or  depart 
from  those  principles  of  honor,  which  it  is  my  pride  to 
be  governed  by.  If,  on  the  contrary,  Congress  have 
elected  me  to  this  office  under  the  expectation,  that  my 
mercantile  connections  and  engagements  were  to  continue, 
an  express  declaration  of  their  sentiments  should  appear 
on  the  minutes,  that  no  doubt  may  arise  or  reflections 
be  cast  on  this  score  hereafter."  How  clearly  do  these 
words  show  the  delicate  sense  of  honesty  which  ani- 
mated Morris !  Well  would  it  be  if  all  public  servants 
were  endowed  with  as  fine  a  sense  of  public  and  private 
duty.  Morris  thought,  too,  and  rightly,  that  all  persons 
who  were  to  co-operate  with  him  should  be  appointed  by 
himself,  Congress  determining  the  number  of  secretaries, 
clerks,  and  other  officers,  and  fixing  their  salaries.  "I 
conceive,"  he  adds,  "  that  it  will  be  impossible  to  execute 
the  duties  of  this  office  with  effect,  unless  the  absolute 
power  of  dismissing  from  office  or  employment  of  all 
persons  whatever,  that  are  concerned  in  the  official  ex- 
penditure of  public  moneys,  be  committed  to  the  super- 
intendent of  finance.  For  unless  this  power  can  be 
exercised  without  control,  I  have  but  little  hopes  of 
efficacy  in  the  business  of  reformation,  which  is  probably 
the  most  essential  part  of  the  duty."  He  also  observed, 
that,  in  the  Act  describing  the  duties  of  the  superintend- 
ent of  finance,  the  execution  of  many  things  was  required 
without  providing  adequate  powers,  and  for  which,  there- 


114        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 

fore,  he  ought  not  to  be  held  responsible.  These  matters, 
however,  he  left  for  future  discussion. 

Congress  readily  assented1  to  Morris's  requests  con- 
cerning his  business  engagements,  and  clothed  him  with 
power  to  appoint  and  remove  delinquent  officials ;  but 
that  part  of  his  communication  describing  the  necessity 
of  doing  many  things  for  which  adequate  powers  were 
not  provided,  and  for  which,  consequently,  he  ought 
not  to  be  held  responsible,  was  referred  to  a  commit- 
tee, who  subsequently  saw  Morris,  and  drew  from  him 
a  second  letter,  containing  several  interesting  features. 
It  appears  that  the  committee,  who  probably  reflected 
the  opinion  of  Congress,  especially  of  Samuel  Adams,2 
who  was  afraid  of  delegating  even  the  smallest  shadow 
of  power  to  anybody,  wanted  more  definite  information 
concerning  the  persons  included  under  the  control  of 
the  removing  power  of  Morris,  and  desired  him  to 
make  a  list  of  them.  This  he  affirmed3  he  was  unable 
to  do,  but  declared  that  such  power  was  absolutely  ne- 
cessary, "  to  enable  him  to  remedy  and  prevent  public 
abuses ;  and  the  extent  should  be  measured  by  the 
necessity  and  the  use."  He  then  described  the  business 
of  finance,  and,  as  the  reader  is  probably  desirous  of 
knowing  what  were  the  views  entertained  by  Morris 
upon  this  grave  matter,  we  shall  let  him  state  them  in 
his  comprehensive  yet  concise  way.  "It  is  to  raise  the 
public  revenues,  by  such  modes  as  may  be  most  easy  and 
most  equal  to  the  people ;  and  to  expend  them  in  the 
most  frugal,  fair,  and  honest  manner.    In  our  case  the 

i  March  20.      2  Wells's  Life  of  S.  Adams,  vol.  iii.  p.  130. 
8  Dip.  Cor.,  vol.  xi.  p.  353. 


1781.]    ADMINISTRATION  OF  THE  BOARD  OF  TREASURY.  115 

first  part  must  ever  be  the  business  of  congress,  and 
the  legislatures  of  the  respective  states;  because  the 
powers  of  taxation  cannot  be  delegated.  The  second  I 
take  to.  be  the  most  essential  part  of  the  duty  of  the 
superintendent  of  finance.  He  must  ever  have  it  in 
view  to  reduce  the  expenditures  as  nearly  as  possible  to 
what  in  justice  and  in  reason  they  ought  to  be ;  and  to 
do  this,  he  must  be  vested  with  power  to  dismiss  from 
employment  those  officers  he  shall  find  unnecessary,  un- 
equal to  their  stations,  inattentive  to  their  duty,  or 
dishonest  in  the  exercise  of  it."  He  then  defines  more 
precisely  the  persons  who  should  be  subject  to  the 
removal  of  the  superintendent  of  finance,  and  then 
enlarges  upon  the  necessity  of  a  frequent  adjustment  of 
accounts,  if  the  era  of  public  economy  was  to  be  intro- 
duced. "  The  financier  ought,  therefore,  to  have  the 
power  of  removing  any  of  the  officers  whose  business  is 
to  examine  and  settle  the  public  accounts,  that  so  he 
may  be  enabled  to  obtain  a  proper  and  early  settle- 
ment, and  prevent  the  dangerous  effects  of  inattention  or 
corruption  on  one  hand;  and  of  delay,  insolence,  and 
tyranny  to  individuals  concerned  in  such  accounts,  on 
the  other."  Thus  Morris  reasoned  concerning  the  neces- 
sity of  putting  this  extraordinary  yet  necessary  power  of 
removal  in  his  hands.  It  may  be  thought  singular  that 
a  body  possessed  of  so  little  power  as  Congress,  and  so 
fearful  of  delegating  it  to  individuals  rather  than  to 
committees,  should  have  consented  to  bestow  so  much 
authority  upon  Morris.  But  he  knew,  and  so  did  Con- 
gress, though  less  perfectly,  how  weak  and  inefficient 
had  been  the  administration  of  the  Board  of  Treasury, 


116        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 

and  how  essential  it  was  for  him  to  have  the  power  he 
desired,  in  order  to  uproot  deeply  penetrating  abuses, 
and  to  carry  out  the  great  work  of  reform,  which  was 
the  chief  reason,  as  he  believed,  for  appointing  him. 
Congress,  therefore,  granted1  the  authority  to  him  for 
which  he  so  earnestly  pleaded,  not,  as  he  himself  said, 
"  for  the  sake  of  the  power,"  but  for  the  sole  purpose  of 
correcting  abuses  connected  with  the  administration  of 
the  Treasury  Department. 

1  March  21,  April  21,  27 


1776.] 


HOW  PAPER  MONEY  WAS  RECEIVED. 


117 


CHAPTER  IX. 

HOW  PAPER  MONEY  WAS  RECEIVED. 

Having  traced  the  history  of  the  administration  of  the 
Board  of  Treasury  from  the  beginning,  to  the  appoint- 
ment of  Robert  Morris  as  superintendent  of  finance,  let 
us  now  consider  how  the  financial  measures  devised  and 
adopted  during  this  period  were  received  by  the  country r 
and  how  they  affected  the  morality  and  prosperity  of  the 
people. 

We  are  prone  to  believe,  that,  in  the  earlier  and  more 
trying  days  of  the  republic,  greater  ability  and  virtue 
abounded  than  are  displayed  in  our  own  degenerate  times. 
Not  a  few  imagine,  that,  in  the  fierce  conflict  to  acquire 
independence,  every  one  was  a  patriot,  and  willing  to  do 
or  suffer  almost  any  thing  to  achieve  success.  Had  this 
been  the  case,  victory  would  have  been  more  easily  won ; 
but  in  truth  the  land  was  full  of  loyalists,  —  persons 
whose  hearts  beat  warm  for  England,  and  who  in  various 
ways  checked  the  progress  of  the  Revolution.  Others 
there  were,  and  not  a  small  number,  who  just  as  eagerly 
sought  to  accumulate  fortunes  by  fraudulent  practices 
upon  the  government  or  upon  individuals,  as  any  one 
did  during  the  late  civil  conflict.1    They  did  not  hesitate 

1  See  Letter  of  Col.  Pickering,  Nov.  22,  1779,  Pickering's  Life  of 
Pick.,  vol.  i.  p.  245. 


118        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1776. 

to  take  advantage  of  a  fluctuating  money  to  speculate 
in  it,  just  as  others  speculated  in  gold  at  a  time  when 
the  business  was  generally  condemned  as  unpatriotic 
and  selfish.  In  Pennsylvania,  under  the  eye  of  the  gov- 
ernment, the  discrediting  of  Continental  money  became 
an  established  business,  and  even  Continental  officers 
trafficked  in  specie.1  The  practice  grew  rapidly,  and 
excited  the  attention  of  the  Council  of  Pennsylvania, 
who  clearly  saw  that  the  credit  of  the  Continental  money 
was  endangered.  The  Council  immediately  appointed  a 
committee  to  inform  the  Board  of  Treasury  about  the 
matter,  and  of  the  need  of  devising  a  remedy  to  suppress 
the  practice.2 

The  impossibility  of  getting  gold  and  silver  for  carrying 
on  the  war  was  one  of  the  reasons,  doubtless,  why  the 
British  Government  determined  to  settle  the  controversy 
in  America  by  the,  sword.  Yet  an  English  general,  in 
the  early  part  of  1776,  reported  3  to  his  government,  "  the 
congress  paper  is  in  the  highest  credit/' 4  though,  before 
the  year  closed,  paper  money  in  the  northern  section  of 
-the  country  was  struck  with  a  mortal  blight.  The  writer 
■of  an  intercepted  letter  to  Sir  Gray  Cooper  declared  that 
Congress  paper  depreciated  beyond  the  rate  of  one  hun- 

1  Am.  Archives,  fifth  series,  vol.  iii.  p.  185.         2  Ibid. 
»  Almon's  Rememb.,  1776,  part  i.  p.  363. 

4  "  The  bills  of  Congress  being  thrown  into  circulation  on  a  favorable 
foundation  of  public  confidence,"  says  Ramsay,  "  were  readily  received. 
The  enthusiasm  of  the  people  contributed  to  the  same  effect.  That  the 
endangered  liberties  of  America  ought  to  be  defended,  and  that  the 
credit  of  their  paper  was  essentially  necessary  to  a  proper  defence,  were 
opinions  engraven  on  the  hearts  of  a  great  majority  of  the  citizens."  — 
Ramsay's  Hist  of  Am.  Bev.,  vol.  ii.  p.  132,  ed.  1789. 


1776.]  HOW  PAPER  MONEY  WAS  RECEIVED.  119 


dred  soon  after  the  King's  troops  entered  Jersey,  and,  in 
many  places  in  that  Province  remote  from  the  army,  was 
not  current  at  any  rate.  In  many  cases,  merchants  con- 
verted their  paper  money  into  commodities,  and  instructed 
their  agents  to  do  likewise.  None  escaped  the  alarm. 
Philemon  Dickinson  1  wrote  to  his  brother,  "  receive  no 
more  continental  money  on  your  bonds  and  mortgages. 
The  British  troops  having  conquered  the  Jersies  and  your 
being  in  camp  are  sufficient  reasons.  Be  sure  you  remem- 
ber this.    It  will  end  better  for  you." 

Gen.  Putnam,  who  was  now  in  command  at  Phila- 
delphia, Congress  having  shortly  before  adjourned  to 
Baltimore,2  issued  an  order  expressing  his  great  astonish- 
ment because  several  of  the  inhabitants  refused  to  take 
Continental  money  in  payment  of  goods.  "In  future," 
he  directed,  "  should  any  of  the  inhabitants  be  so  lost  to 
public  virtue  and  the  welfare  of  their  country,  as  to 
presume  to  refuse  the  currency  of  the  American  states  in 
pa}rment  for  any  commodities  they  may  have  for  sale,  the 
goods  shall  be  forfeited,  and  the  person  or  persons  so 
refusing,  committed  to  close  confinement."  3 

Putnam  enforced  this  order,  and  closed  or  pillaged 
stores,  fined  and  imprisoned  their  owners ;  yet  it  was 
impossible  to  restrain  the  fears  of  the  people  respecting 
the  unsoundness  of  the  currency.  Robert  Morris 4  wrote 
to  Deane,  who,  in  company  with  other  commissioners, 
was  trying  to  solicit  aid  from  France :  "I  must  add  to  this 
gloomy  picture  one  circumstance,  more  distressing  than 

1  Am.  Archives,  fifth  series,  vol.  iii.  p.  1255.       2  Dec.  12,  1776. 
8  Am.  Archives,  fifth  series,  vol.  iii.  p.  1214. 
4  Dec.  21,  1776,  Dip.  Cor.,  vol.  i.  p.  238. 


120        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1776. 

all  the  rest,  because  it  threatens  instant  total  ruin  to  the 
American  cause,  unless  some  radical  cure  is  applied,  and 
that  speedily  ;  I  mean  the  depreciation  of  the  continental 
currency.  The  enormous  pay  of  our  army,  the  immense 
expenses  at  which  they  are  supplied  with  provisions, 
clothing,  and  other  necessaries,  and,  in  short,  the  extrava- 
gance that  has  prevailed  in  most  departments  of  the 
public  service,  have  called  forth  prodigious  emissions  of 
paper  money,  both  continental  and  colonial.  Our  in- 
ternal enemies,  who,  alas,  are  numerous  and  rich,  have 
always  been  undermining  its  value  by  various  artifices, 
and  now  that  our  distresses  are  wrought  to  a  pitch  by 
the  successes  and  near  approach  of  the  enemy,  they  speak 
plainer,  and  many  peremptorily  refuse  to  take  it  at  any 
rate.  Those  that  do  receive  it,  do  it  with  fear  and  trem- 
bling, and  you  may  judge  of  its  value,  even  amongst 
those,  when  I  tell  you  that  c£250  continental  money,  or 
666  §  dollars  is  given  for  a  bill  of  exchange  of  £100  ster- 
ling, sixteen  dollars  for  a  half  johannes,  two  paper  dollars 
for  one  of  silver,  three  dollars  for  a  pair  of  shoes,  twelve 
dollars  for  a  hat,  and  so  on ;  a  common  laborer  asks  two 
dollars  a  day  for  his  work,  and  idles  half  his  time. 

"  All  this  amounts  to  real  depreciation  of  the  money. 
The  war  must  be  carried  on  at  an  expense  proportional 
to  this  value,  which  must  inevitably  call  for  immense 
emissions,  and,  of  course,  still  further  depreciations  must 
ensue." 

Two  days  later  he  writes  to  the  president  of  Congress : 1 
"  It  is  very  mortifying  to  me  when  I  am  obliged  to  tell 
you  disagreeable  things;  but  I  am  compelled  to  inform 

1  Am.  Archives,  fifth  series,  vol.  iii.  p.  1372. 


1776.] 


HOW  PAPER  MONEY  WAS  RECEIVED. 


121 


congress  that  the  continental  currency  keeps  losing  in 
credit.  Many  people  refuse  openly  and  avowedly  to 
receive  it;  and  several  citizens  that  retired  into  the 
country  must  have  starved  if  their  own  private  credit 
had  not  procured  them  the  common  necessaries  of  life, 
when  nothing  could  be  got  for  your  money.  Some 
effectual  remedy  should  be  speedily  applied  to  this  evil 
or  the  game  will  be  up.  Mr.  Commissary  Wharton  has 
told  the  general  that  the  mills  refused  to  grind  for  him, 
either  from  disaffection  or  dislike  to  the  money.  Be  that 
as  it  may,  the  consequences  are  terrible  for  I  do  suppose 
the  army  will  not  consent  to  starve." 

The  situation  grew  more  and  more  critical,  until  Gen. 
Washington  was  vested  with  power1  to  take  whatever 
provisions  were  needed  for  his  army  if  the  inhabitants 
were  unwilling  to  sell  them  at  a  reasonable  price,  and 
to  arrest  and  confine  all  who  refused  to  receive  the  Con- 
tinental money.  At  the  same  time  the  Council  of  Safety 
of  Pennsylvania  were  requested  to  apply  speedy  and 
vigorous  measures  in  punishing  those  who  declined  to 
receive  paper  money,  and  to  call  for  aid  on  the  general 
commanding,  if  needful,  to  carry  out  their  determina- 
tion. 

On  the  last  day  of  the  year,  the  Council  of  Safety  of 
Pennsylvania2  declared,  as  a  consequence  of  the  disaffec- 
tion concerning  the  issues  of  paper  money  and  of  the 
dangerous  schemes  devised  for  the  purpose  of  destroying 
the  public  credit,  that  any  person  who  should  refuse  to 
take  Continental  currency  in  payment  of  any  debt  or 
contract  whatsoever,  or  for  any  goods  or  commodity 

1  Dec.  27,  1776.  2  1776,  Penn.  Archives,  vol.  v.  p.  147. 


122        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1777. 


offered  for  sale,  or  should  ask  a  greater  price  for  any 
commodity  in  such  Continental  currency  than  in  any 
other  kind  of  money  or  specie,  should  for  the  first  offence 
be  considered  as  a  dangerous  member  of  society,  and 
forfeit  the  debt,  or  goods  purchased,  to  the  person  who 
contracted  for  the  same,  and  should,  moreover,  be  sub- 
ject to  a  penalty  of  five  pounds  for  all  contracts  under 
that  sum,  and,  for  the  second  offence,  should  be  subject, 
not  only  to  the  above  mentioned  penalties,  but  also  to 
banishment  from  the  State  to  such  place  as  the  council 
should  direct. 

In  consequence  of  the  reverses  suffered  by  the  national 
arms,  the  credit  of  the  Union  rapidly  weakened.  Even 
quondam  associators  refused  to  receive  the  money.  Com- 
modities could  not  be  bought,  except  with  specie,  or  bills 
of  credit  issued  during  the  colonial  period,  which,  it 
was  believed,  might  perhaps  be  redeemed.  "  The  tav- 
ern keepers  took  down  their  signs  and  refused  to  enter- 
tain the  passing  stranger.  The  continental  money  was 
freely  offered  at  two  for  one ;  the  contest  seemed  hasten- 
ing to  an  inglorious  end;  the  war  could  not  be  carried 
on.  The  soldiers,  deprived  of  all  other  sources  of  money 
save  those  which  the  congress  offered  to  them,  were  un- 
able to  procure  the  commonest  necessaries  of  life.  The 
most  stringent  measures  were  indispensable  to  hold  to- 
gether the  structure  which  eighteen  months  had  raised 
and  Independence  had  cemented."  1 

The  year  1777  was  marked  with  the  enterprise  and 
capture  of  Burgoyne.  His  intention  was  to  march  down 
from  Canada,  and  effect  a  juncture  with  Sir  Henry  Clin- 

1  Phillips,  Cont.  Paper  Money,  p.  64. 


1777.]  HOW  PAPER  MONEY  WAS  RECEIVED.  123 


ton,  who  was  stationed  at  New  York,  thus  cutting  the 
Union  in  twain.  The  effect  of  this  movement,  when 
known,  was  to  hasten  the  depreciation  of  the  Continental 
money.  James  Lang,1  writing  from  Lancaster  in  Penn- 
sylvania to  the  Pennsylvania  Board  of  War,  says  that 
"  Depreciating  is  really  become  a  trade  here,  and  even 
the  friends  of  liberty  are  induced,  nay  almost  necessi- 
tated, to  adopt  the  hard  measure.  The  Mennonites  refuse 
to  sell  their  produce  unless  for  hard  cash,  and  when  they 
bring  any  market  stuff  to  town,  will  carry  it  from  house 
to  house  and  sell  it  very  low  for  hard  cash,  but  will  carry 
it  home  again  rather  than  sell  it  for  congress  currency." 
As  a  check  to  this  growing  evil,  he  recommended  the 
appointment  of  a  trusty  and  spirited  person  who  had  no 
connections  there,  to  reside  there  and  take  cognizance  of 
all  those  matters.  "Let  him  cause  a  party  of  soldiers  to 
seize  any  person  accused  of  depreciating  or  refusing  the 
congress  currency,  whether  in  buying  or  selling.  Let  him 
immediately  after  seizing  such  person,  take  an  inventory 
of  the  person's  estate  real  and  personal,  and  transmit 
the  inventory  to  any  board  the  law  might  direct.  And 
let  the  person  so  seized  be  immediately  sent  to  the  state 
prison,  there  to  remain  without  bail  till  tried  for  mis- 
prision of  treason,  or  call  it  felony,  if  judged  proper,  and 
let  the  punishment  be  equal  to  the  crime.  I  confess  the 
measure  looks  violent,  but  if  something  equally  so  is 
not  immediately  done,  I  am  firmly  persuaded  the  cause 
will  be  materially  hurt." 2 

1  June  22,  1777,  Penn.  Archives,  vol.  v.  p.  396. 

2  Paper  money  did  not  circulate  in  Philadelphia  in  October,  1777. 
Penn.  Hist.  Soc.  Coll.,  vol.  i.  p.  173. 


124        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1777. 


Violent  indeed  was  the  measure;  but  was  not  almost 
any  measure  justifiable  to  save  the  Union  ? 

The  value  of  Continental  money  was  not  so  easily 
shaken  in  the  South  as  in  the  Northern  portion  of  the 
Union.  Several  months  passed,  after  Congress  issued  it, 
before  any  reached  South  Carolina ;  and  so  scarce  was  it 
there  in  the  summer  of  1777,  that  a  premium  of  ten  per 
cent  was  paid  to  procure  it  "  for  the  accommodation  of 
persons  travelling  to  the  northward." 1  Probably  Laurens, 
when  making  his  speech  in  opposition  to  issuing  foreign 
bills  of  exchange,  which  has  been  given  in  a  previous 
chapter,  was  thinking  of  the  wants  of  the  South  in 
affirming  there  was  a  deficiency  rather  than  surplus  of 
paper  money.2 

Among  the  worst  sufferers  were  the  Quakers.  They 
refused  to  accept  paper  money  issued  by  Congress, 
grounding  their  refusal  on  a  religious  principle  main- 
tained by  the  sect.  As  a  consequence  of  their  fidelity 
to  it,  they  were  fined,  imprisoned,  and  banished  ;  their 

1  Observations  of  English  Commissioners,  Nov.  25,  1780,  Almon's 
Rememb.,  1781,  part  1,  pp.  214,  215. 

2  Ante,  p.  60.  Ramsay  says  that  "  the  depreciation  began  at  very 
different  periods  in  different  states;  but  in  general  about  the  middle 
of  the  year  1777,  and  progressively  increased  for  three  or  four  years. 
Towards  the  last  of  1777,  the  depreciation  was  about  two  or  three  for 
one;  in  1778  it  advanced  from  two  or  three  for  one  to  five  or  six  for 
one ;  in  1779  from  five  or  six  for  one  to  27  or  28  for  one ;  in  1780  from  27 
or  28  for  one  to  50  or  60  for  one,  in  the  first  four  or  five  months.  Its 
circulation  was  afterwards  partial,  but  where  it  passed  it  soon  depre- 
ciated to  150  for  one.  In  some  few  parts  it  continued  in  circulation 
for  the  first  four  or  five  months  of  1781,  but  in  this  latter  period  many 
would  not  take  it  at  any  rate,  and  they  who  did,  received  it  at  a  depre- 
ciation of  several  hundreds  for  one."  —  Hist,  of  Am.  Rev.,  vol.  ii.  p.  128. 


1778.] 


HOW  PAPER  MONEY  WAS  RECEIVED. 


125 


stores  were  robbed;  and  their  property  was  confiscated. 
Perhaps  they  suffered  more  severely  than  any  other  class 
of  people.  "  All  this  upon  public  opinion  so  fickle  that 
it  was  deemed  a  crime  in  1781  to  say  this  paper  money 
should  be  redeemed  at  its  full  value,  a  public  opinion 
which  had  in  1777  denounced  as  a  criminal,  any  person 
who  should  receive  it  for  a  less  amount  than  was  ex- 
pressed upon  its  face." 1 

There  were  those,  however,  who  believed  the  opposi- 
tion to  paper  money  displayed  by  the  Quakers  was 
inspired  quite  as  much  by  love  for  money  as  by  re- 
ligious principle.2  This  was  the  belief  of  Gouverneur 
Morris,  who  issued  an  address,  directed  chiefly  to  them, 
in  which,  after  showing  the  futility  of  their  hopes  of 
the  enemy's  ultimate  success,  he  adds  "  as  little  ground 
have  you  for  hope  in  the  depreciation  of  the  continental 
money."  He  then  proceeds  to  state  the  causes  of  its 
depreciation,  for  the  purpose  of  showing  how  much  paper 
money  was  really  worth,  and  why  it  ought  to  be  refused 
no  longer  by  any  class  or  sect.  "  You  know  that  [the 
depreciation]  is  in  a  great  degree  to  be  attributed  to  the 
acts  of  interested  men,  whose  efforts  to  acquire  it  show 
their  conviction  of  its  value.  I  know  it  hath  been  a 
fashionable  doctrine,  that  after  the  emissions  should 
amount  to  a  certain  sum,  the  bubble,  as  the  phrase  was, 
would  burst.  But  the  absurdity  of  this  to  men  ac- 
quainted with  human  nature,  was  evident.  The  reasons 
are  needless,  because  we  may  appeal  to  experience,  to 

1  Phillips,  p.  73. 

2  Phillips  says,  that,  before  the  Revolution,  the  Quakers  would  as 
readily  accept  bills  issued  for  war  purposes  as  for  any  other,  p.  37. 


126 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 


show  whether  there  is  the  least  danger  of  this  event. 
When  two  emissions  were  called  in,  and  every  method, 
consistent  with  justice  and  good  faith,  taken  to  stop 
their  circulation,  those  who  had  principally  contributed 
to  depreciate  the  money,  were  the  very  persons  who 
continued  to  receive  the  vicious  emissions.  For  as  soon 
as  it  became  a  question,  whether  they  should  not  lose 
the  value,  but  merely  the  use  of  so  much  money,  they 
made  every  effort  to  uphold  the  credit  of  it.  A  few  days 
ago  when  a  report  prevailed  of  the  arrival  of  some 
favorable  intelligence  from  Europe,  such  of  you  as  are 
in  this  city  cannot  but  remember  the  rapid  fall  of  every 
article,  specie  not  excepted.  Hence  the  deduction  is 
clear,  that  the  money  issued  by  congress  is  intrinsically 
worth  what  they  contend,  but  is  depreciated  by  the 
quantity  in  some  degree,  and  more  by  the  arts  of  en- 
grossers. Take  the  familiar  proposition,  that  a  country 
will  easily  bear  taxation  to  the  amount  of  some  given 
part  of  the  circulating  medium,  suppose  a  tenth,  though 
in  fact  one-fifth  may  be  raised  among  a  free  people,  and 
you  will  see  that,  let  the  paper  medium  be  increased  to 
any  degree,  it  may  be  sunk  in  a  short  period." 1  Plausi- 
ble as  was  the  reasoning  of  Morris,  the  Quakers,  Men- 
nonites,  Bethlemites,  and  other  religious  sects,  and  of 
course  the  Tories,  refused  to  accept  Continental  paper 
money  whenever  they  could  escape  doing  so,  thus  em- 
barrassing the  General  Government,  and  hastening  the 
day  when  its  paper  issues  would  be  refused  by  every 
one. 

Toward  the  close  of  1777,  John  Adams,2  writing  in 
i  Almon's  Rememb.,  1779,  p.  249.         2  Works,  vol.  ix.  p.  469. 


1777.] 


HOW  PAPER  MONEY  WAS  RECEIVED. 


127 


Braintree  to  Gerry,  who  was  then  one  of  the  most 
efficient  members  of  the  Board  of  Treasury,  said,  "I 
find  the  same  perplexities  here  that  we  felt  at  Yorktown, 
a  general  inclination  among  the  people  to  barter,  and  as 
general  an  aversion  to  dealing  in  paper  money  of  any 
denomination  ;  guineas,  half  joes,  and  milled  dollars  in 
as  high  estimation  as  in  Pennsylvania.  The  moneyed 
men,  I  am  informed,  generally  decline  receiving  paper 
for  their  debts ;  many  refuse ;  and  it  is  said  all  will, 
very  soon.  There  is  a  whispering  about  among  the 
richer  sort  that  an  act  is  necessary  for  allowing  a  depre- 
ciation or  an  appreciation,  as  the  case  may  be,  upon 
specialties;  and  the  poorer  sort  look  cunning,  and 
give  hints  that  the  rich  are  aiming  at  a  depreciation," 

Adams  then  depicts  some  of  the  evil  consequences  to 
which  the  depreciated  money  had  given  rise,  and  his 
feelings  about  the  matter.  "The  rapid  translation  of 
property  from  hand  to  hand,  the  robbing  of  Peter  to  pay 
Paul,  alarms  and  distresses  me  beyond  measure.  The 
man  who  lent  another  a  hundred  pounds  in  gold  four 
years  ago,  and  is  paid  now  in  paper,  cannot  purchase 
with  it  one  quarter  part  in  pork,  beef,  or  land,  of  what 
he  could  when  he  lent  the  gold.  This  is  fact,  and  facts 
are  stubborn  things  in  opposition  to  speculation."  Hav- 
ing declared  that  the  depreciation  would  prove  a  serious 
perplexity  even  to  Gerry,  he  continues,  "It  will  not 
ruin  our  cause,  great  as  the  evil  is,  and  if  it  was  much 
greater.  But  it  torments  me  to  see  injustice  both  to 
the  public  and  to  individuals  so  frequent.  Every  man's 
liberty  and  life  are  equally  dear  to  him ;  every  man, 
therefore,  ought  to  be  taxed  equally  for  the  defence  of 


128        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 


his  life  and  liberty.  That  is,  the  poll  tax  should  be 
equal.  Every  man's  property  is  equally  dear  both  to 
himself  and  to  the  public;  every  man's  property  ought 
to  be  taxed  for  the  defence  of  the  public  in  proportion 
to  the  quantity  of  it.  These  are  fundamental  maxims 
of  sound  policy.  But  instead  of  this  every  man  who 
had  money  due  to  him  at  the  commencement  of  this 
war,  has  been  already  taxed  three-fourth  parts  of  that 
money,  besides  his  tax  on  his  poll  and  estate  in  proportion 
to  other  people.  And  every  man  who  owed  money  at 
the  beginning  of  the  war,  has  put  three-fourth  parts  of 
it  in  his  pockets  as  clear  gain.  The  war,  therefore,  is 
immoderately  gainful  to  some,  and  ruinous  to  others. 
This  will  never  do."  Everywhere  was  the  depreciation 
recognized,  giving  rise  to  serious  evils  which  were  alarm- 
ing and  painful  to  all  good  men. 

In  Massachusetts  a  new  plan  was  originated  for  enhan- 
cing the  value  of  the  Continental  money.  At  a  public 
meeting  in  Boston,  it  was  proposed  that  Congress  should 
redeem  all  the  State  issues  with  Continental  money, 
charging  each  State  for  the  sum  received,  and  then 
replacing  these  latter  issues  with  loan-office  certificates  as 
rapidly  as  possible.1  In  this  way  it  was  thought  the 
volume  of  paper  money  might  be  contracted  and  appre- 
ciated, while  all  the  States  would  be  equally  interested  in 
maintaining  its  value. 

The  army  spent  the  winter  of  1777  and  1778  at  Valley 
Forge,  —  an  event  to  be  forever  remembered  on  account 
of  the  dreadful  sufferings  endured  by  the  soldiers.  By 
foraging,  the  troops  were  able  to  procure  at  best  only  a 

1  Boston  Gazette,  June  2,  1777. 


1778.]  HOW  PAPER  MONEY  WAS  RECEIVED.  129 

precarious  living.  Meanwhile,  as  the  British  commissary 
department  paid  in  gold,  the  farmers  were  tempted  to  sell 
their  produce  to  their  enemies,  rather  than  to  the  Ameri- 
can camp.  To  prevent  this,  a  guard  was  placed  along 
the  Schuylkill,  to  stop  supplies  from  reaching  the  British 
army. 

In  the  spring1  Congress  addressed  the  people  on  the 
condition  of  their  paper  money,  and  suggested  methods 
for  improving  its  value.  Congress  sought  to  strength- 
en the  faith  of  the  people  by  the  inquiry,  "Is  there  a 
country  upon  earth  which  hath  such  resources  for  the 
payment  of  her  debts  as  America  ?  such  an  extensive  ter- 
ritory ?  so  fertile,  so  blessed  in  its  climate  and  productions  ? 
Surely  there  is  none.  Neither  is  there  any  to  which  the 
wise  Europeans  will  sooner  confide  their  property.  What, 
then,  are  the  reasons  that  your  money  hath  depreciated? 
Because  no  taxes  have  been  imposed  to  carry  on  the  war : 
because  your  commerce  hath  been  interrupted  by  your 
enemy's  fleet:  because  their  armies  have  ravaged  and 
desolated  a  part  of  your  country  :  because  their  agents 
have  villanously  counterfeited  your  bills :  because  extor- 
tioners among  you,  inflamed  with  the  lust  of  gain,  have 
added  to  the  price  of  every  article  of  life:  and  because 
weak  men  have  been  artfully  led  to  believe  that  it  is  of 
no  value.  How  is  this  dangerous  disease  to  be  remedied? 
Let  those  among  you  who  have  leisure  and  opportunity, 
collect  the  moneys  which  individuals  in  their  neighbor- 
hood are  desirous  of  placing  in  the  public  funds.  Let 
the  several  legislatures  sink  their  respective  issues,  that 
so,  there  being  but  one  kind  of  bills,  there  may  be  less 


i  May  8,  1778. 


130        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 

danger  of  counterfeits.  Refrain  a  little  while  from  pur- 
chasing those  things  which  are  not  absolutely  necessary, 
so  that  those  who  have  engrossed  commodities  may  suffer 
(as  they  deservedly  will)  the  loss  of  their  ill-gotten 
hoards,  by  reason  of  the  commerce  with  foreign  nations, 
which  fleets  will  protect." 

Of  course,  the  country  abounded  in  Solons,  having 
specifics  which  would  effect  a  speedy  and  complete  cure, 
if  Congress  could  be  persuaded  to  use  them.  It  would 
not  be  uninteresting  to  describe  some  of  them  ;  but  we 
have  space  to  set  forth  only  one,  the  simplicity  of  which 
is  in  marked  contrast  with  several  of  the  schemes  pre- 
sented.1 "  My  scheme  is  a  deep  scheme,"  begins  the 
writer.  "  The  depreciation  certainly  arises  from  torture. 
Many  a  poor  cur  has  been  destroyed  by  the  cry  of  mad 
dog,  that  was  a  good  honest  cur  if  he  had  been  let  alone. 
—  Leonidas,  I  wish  you  had  been  prescribing  for  the  bite 
of  a  mad  dog,  when  you  told  us  that  life  might  as  well 
survive  in  a  furnace  as  truth  or  honor  in  the  neighbor- 
hood of  certain  bills.  —  No  matter,  Sir,  torture,  vile  tor- 
ture, is  the  source  of  all  the  mischief.  If  these  creatures 
will  but  let  the  public  credit  alone,  my  life  for  it,  it  will 
revive."  His  panacea,  as  the  reader  may  suspect,  was  for 
his  "brother  schemers"  to  stop  writing,  and  leave  the 
currency  to  the  operation  of  other  principles  than  those 
which  are  so  easily  woven  by  the  imagination.  A  good 
point,  doubtless  ;  yet  his  "  brother  schemers  "  continued 
to  ply  their  pens  as  vigorously  as  ever. 

The  newspapers  of  the  day  were  prolific  with  essays 
showing  the  certainty  of  the  redemption  of  the  Con- 

1  Penn.  Packet,  Jan.  6,  1780. 


1779.]  HOW  PAPER  MONEY  WAS  RECEIVED.  131 

tinental  money,  because  independence  was  assured. 
"  Whatever  else  America  may  be  tempted  to,  she  never 
can  be  brought  to  a  violation  of  her  own  faith,1."  is  a  fair 
illustration  of  the  kind  of  argument  they  employed  to 
prop  the  leaning  credit  of  the  government. 

During  the  year  1778  an  alliance  was  formed  with 
France ;  in  June,  Howe  evacuated  Philadelphia ;  and,  on 
his  way  to  New  York,  Washington  fought  the  'battle  of 
Monmouth;  the  British  fleet  narrowly  escaped  battle, 
and  probable  capture  by  the  French  squadron :  yet  the 
courage  of  the  people,  though  roused  by  these  events, 
was  somewhat  depressed  by  the  indecisive  military  opera- 
tions of  the  summer  and  autumn. 

Notwithstanding  the  plentifulness  of  almost  every  kind 
of  goods,  it  was  difficult  to  purchase  them,  except  for 
hard  money.  "  The  state  of  our  currency  is  really 
serious,"  Jay  writes  to  Washington.2  "When,  or  by 
what  means  the  progress  of  its  depreciation  will  be  pre- 
vented is  uncertain.  The  subject  is  delicate,  but  the 
conduct  of  some  men  really  indicates  at  least  great  indif- 
ference about  it."  To  which  Phillips3  adds,  "The  fluctu- 
ating currency,  with  the  opportunities  it  afforded  for 
speculation  and  for  oppression,  was  too  much  loved  by 
the  dishonest  for  them  to  readily  permit  any  measures  to 
be  taken  for  its  improvement."  What  a  striking  parallel 
was  seen  in  this  country  during  the  recent  civil  war ! 

How  depreciation  was  regarded  at  this  time  by  Wash- 
ington 4  may  be  seen  from  the  following  extract  contained 

1  Penn.  Packet,  Jan.  26,  1779. 

2  April  26,  1779,  Jay's  Life  of  Jay,  vol.  ii.  p.  48. 

8  Cont.  Paper  Money,  p.  115.    4  Sparks' s  Washington,  vol.  vi.  p.  161. 


132        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 

in  a  letter  to  the  committee  of  Congress :  "  The  great 
impediment  to  all  vigorous  measures,  is  the  state  of  our 
currency..  What  prospects  there  are  of  relieving  it,  what 
is  to  be  expected  from  the  measures  taken  to  that  effect, 
the  committee  to  whom  the  subject  is  familiar,  and  by 
whom  it  is  best  understood,  will  judge.  But  I  fear  their 
operations  will  be  too  slow  to  answer  the  purposes  of  the 
next  campaign ;  and,  if  the  vast  expenditures  necessary 
to  the  plan  under  consideration  were  to  be  made,  I  should 
have  little  hope  of  the  success  of  any  project  for  raising 
the  value  of  the  currency  that  can  be  adopted."  Subse- 
quently he  writes,  "that  a  wagon  load  of  money  will 
scarcely  purchase  a  wagon  load  of  provisions." 

Congress  again  implored  the  people  to  aid  in  preserving 
the  value  of  the  rapidly-sinking  money.1  The  enemy's 
only  hope  was  the  bankruptcy  of  the  government ;  but, 
as  Phillips 2  remarks,  this  "  was  of  a  most  paradoxical 
kind,  as  it  ensued  from  superabundance,  and  not  the 
want  of  money."  "  Were  it  possible,"  remark  a  com- 
mittee appointed  by  the  citizens  of  Philadelphia,  in 
June,  1779,  "  that  the  property  of  America  could  fail,  her 
lands  become  barren,  her  rivers  dried  up,  agriculture 
extinguished  and  population  extinct,  the  currency  would 
then  want  a  foundation  for  its  credit,  and  ability  for  its 
redemption ;  because  in  those  cases  it  would  be  a  repre- 
sentation of  nothing.  Having  said  thus  much  on  the 
subject  we  shall  conclude  with  recommending  it  to  our 
sister  states  to  concur  with  us  in  measures  absolutely 
necessary  at  this  time,  for  redeeming  and  supporting  the 
credit  of  our  currency,  and  of  consequence  individual 

1  Ma}'  2G,  1779.  2  Cont.  Paper  Money,  p.  127. 


1779.] 


HOW  PAPER  MONEY  WAS  RECEIVED. 


133 


prosperity.  We  wish  to  see  committees  formed  in  every 
state  and  county,  whose  immediate  business  it  shall  be  to 
watch  against  the  depreciation,  and  promote  the  value  of 
the  money."  1 

In  October  of  the  same  year  the  Rev.  John  Clarke2 
informs  Timothy  Pickering,  "We  can  procure  nothing, 
sir,  for  money;  barter  is  the  only  method  of  commerce 
which  now  prevails.  You  will  therefore  readily  believe 
that  the  circumstances  of  such  as  have  neither  salt,  sugar, 
etc.,  beggar  all  description.  It  is  my  firm  belief  that  we 
are  the  wretchedest  people  under  heaven.  We  have 
depraved  every  virtuous  principle,  and,  was  Britain  to 
remove  her  troops  and  leave  us  to  our  independence,  it 
seems  to  me  we  should  be  incapable  of  enjoying  it." 

Two  months  earlier  Washington 3  had  instructed  his 
agent  to  receive  Continental  money  no  longer  at  par  for 
debts.4  "  If  it  be  customary  with  others,"  he  says,  "  to 
receive  money  in  this  way,  that  is,  sixpence  or  one 
shilling  on  the  pound  for  old  debts;  if  it  is  thought  to 
be  promotive  of  the  great  cause  we  are  embarked  in  for 
individuals  to  do  so,  thereby  ruining  themselves  while 

1  Perm.  Packet,  June  29,  1779. 

2  Pickering's  Life  of  Pick.,  vol.  i.  p.  242. 
8  Sparks'  s  Washington,  vol.  vi.  p.  321. 

4  "I  have  considered  the  matter  in  every  point  of  view  in  which  my 
judgment  enables  me  to  place  it,  and  am  resolved  to  receive  no  more  old 
debts  (such,  I  mean,  as  were  contracted  and  ought  to  have  been  paid 
before  the  war)  at  the  present  nominal  value  of  the  money,  unless  com- 
pelled to  do  it,  or  it  is  the  practice  of  others  to  do  it.  Neither  justice, 
reason,  nor  policy  requires  it.  The  law  undoubtedly  was  well  designed. 
It  was  intruded  to  stamp  a  value  upon,  and  to  give  a  free  circulation  to, 
the  paper  bills  of  credit ;  but  it  never  was  nor  could  have  been  intended 


134 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 


others  are  reaping  the  benefit  of  such  distress ;  if  the  law 
imposes  this,  and  it  is  thought  right  to  submit,  I  will  not 
say  aught  against  it  nor  oppose  another  word  to  it.  No 
man  has  gone,  and  no  man  will  go,  further  to  serve  the 
republic  than  myself.  If  sacrificing  my  whole  estate 
would  effect  any  valuable  purpose,  I  would  not  hesitate 
one  moment  in  doing  it.  But  my  submitting  in  matters 
of  this  kind,  unless  the  same  is  done  by  others,  is  no  more 
than  a  drop  in  the  bucket.  In  fact,  it  is  not  serving  the 
public,  but  enriching  individuals,  and  countenancing 
dishonesty;  for  sure  I  am,  that  no  honest  man  would 
attempt  to  pay  twenty  shillings  with  one,  or  perhaps 
half  of  one.  In  a  word,  I  had  rather  make  a  present  of 
the  bonds  than  receive  payment  of  them  in  so  shameful  a 
way."  1 

Of  course,  it  was  to  be  expected  that  the  enemy  would 
report  the  depreciation  much  greater  than  it  really  was. 
Accordingly,  "  The  London  Morning  Post,"  in  February, 
1779,  declared  that  depreciation  was  seven  hundred  per 
cent.     Twenty  paper  dollars  were  given  for  a  silver 

to  make  a  man  take  a  shilling  or  sixpence  in  the  pound  for  a  just  debt 
which  his  debtor  is  well  able  to  pay,  and  thereby  involve  himself  in  ruin. 
I  am  as  willing  now  as  I  ever  was  to  take  paper  money  for  every  kind  of 
debt,  and,  at  its  present  depreciated  value,  for  those  debts  which  have 
been  contracted  since  the  money  became  so;  but  I  will  not  in  future 
receive  the  nominal  sum  for  such  old  debts  as  come  under  the  above  de- 
scription, except  as  before  specified." 

1  In  an  address  delivered  by  Frederick  K.  Stone  before  the  Historical 
Society  of  Pennsylvania,  entitled  Philadelphia  Society  One  Hundred 
Years  Ago,  or  the  Reign  of  Continental  Money,  a  large  number  of  facts 
pertinent  to  this  chapter,  and  also  to  the  chapter  on  Speculation,  Corrup- 
tion, and  Repudiation,  are  given. 


1780.] 


HOW  PAPER  MONEY  WAS  RECEIVED. 


135 


one ;  and  the  Dutch  were  warned  not  to  assist  the  French 
by  loaning  them  money,  since  the  finances  of  the  rebel- 
lious Colonies  were  in  such  an  extremely  low  condition.1 

Depreciation  of  the  currency  was  now  everywhere  ac- 
knowledged, Congress  alone  refusing  to  recognize  the 
fact.  During  the  year  the  depreciation  had  increased 
from  eight  dollars  to  forty-one  dollars  and  a  half  for 
one.2 

The  next  year  saw  the  end  of  Continental  paper  money. 
The  bill  passed  in  March,  1780,  declaring  forty  dollars  in 
paper  equivalent  to  one  in  specie,  destroyed  what  little 
faith  the  most  confiding  had  retained  in  the  bills.  Not 
all  discussion  concerning  their  redemption  was  yet  over ; 
but  their  end,  nevertheless,  had  come.  There  were  those 
who  declaimed  loudly  against  this  measure.  Dr.  Wither- 
spoon  of  New  Jersey,  one  of  the  most  prominent  mem- 
bers of  Congress,  could  not  reconcile  himself  to  so  flagrant 
a  breach  of  promise.3 

France  was  deeply  stirred  by  this  action  of  Congress. 
The  Count  de  Vergennes4  addressed  several  letters  to 
Adams  and  Franklin  upon  the  subject,  the  chief  concern 
expressed  in  them  relating  to  the  effect  of  the  measure 
upon  French  subjects.  He  very  plainly  declares  they 
ought  to  have  been  exempted  from  the  operation  of  the 
Act,  which  should  have  applied  to  Americans  alone. 

1  Newspaper  Cuttings,  vol.  v.  pp.  191,  261,  N.  Y.  Hist.  Library. 

2  Phillips,  p.  145. 

8  He  made  an  eloquent  speech  in  Congress  in  favor  of  maintaining 
the  public  faith.  Wain's  Life  of  Witherspoon,  Biog.  Signers  to  tha 
Dec.  of  Indep.,  vol.  v.  pp.  143,  149. 

4  June  21,  1780,  J.  Adams's  Works,  vol.  vii.  p.  190;  June  30,  1780, 
ibid.,  p.  212. 


136        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1780. 


Adams  replied 1  that  it  was  just  to  redeem  the  bills 
according  to  their  value,  as  they  had  been  received  in 
the  same  way.2 

At  the  same  time  the  Forty-for-one  Act  was  passed, 
Congress  resolved  to  pay  the  holders  of  loan-office  cer- 
tificates as  much  as  paper  money  was  worth  at  the  time 
the  certificates  were  issued.  The  publication  of  this 
resolution,  for  some  reason  or  other,  was  delayed  for  a 
considerable  period  after  its  enactment.  Had  the  two 
been  given  to  the  public  simultaneously,  the  alarm  occa- 
sioned in  Europe  when  the  first  Act  was  known  might 
have  been  averted,  because  nearly  all  the  interest  of 
European  merchants  in  American  funds  centred  in  the 
loan-office  certificates.3  The  paper  money  in  the  pos- 
session of  foreign  agents  residing  in  America  had  been, 
for  the  most  part,  received  at  a  greatly  reduced  rate ; 

1  June  22,  1780,  ibid.,  p.  193;  July  1,  1780,  ibid.,  p.  213. 

2  Gen.  Greene  expressed  bis  opinion  of  tbis  Act  in  a  letter  to  Morris, 
from  which  the  following  is  an  extract:  "  The  tender  laws  and  the  plan 
of  redeeming  the  continental  money,  forty  for  one,  have  been  replete 
with  every  kind  of  mischief.  Credit  and  reputation  are  much  alike, 
either  in  public  or  private  life.  Once  lost  they  are  very  difficult  to  be 
regained,  and  no  advantage  gained  at  the  expense  of  our  credit  or 
reputation  can  compensate  for  the  loss  of  them.  It  was  ever  my 
opinion,  that  we  ought  to  have  supported  the  old  continental  money,  and 
I  am  persuaded  it  would  have  afforded  us  the  best  medium  of  any  plan 
we  had  it  in  our  power  to  adopt.  The  hopes  of  benefiting  by  its 
appreciation  would  have  supported  its  credit.  If  the  states  could  have 
been  prohibited  from  making  money,  and  the  taxes  kept  in  motion,  the 
continental  money  would  have  afforded  a  tolerable  medium  for  business 
of  all  kinds."  (Greene's  Life  of  Greene,  vol.  iii.  p.  371.)  The  letter 
was  dated  Aug.  18,  1781. 

8  Letter  of  John  Adams  to  Count  de  Vergennes,  June  20,  17S0, 
Works,  vol.  vii.  p.  188. 


1T80.] 


HOW  PAPER  MONEY  WAS  RECEIVED. 


137 


and  the  Forty-for-one  Act  did  not  make  the  legal 
valuation  less  than  the  actual  depreciation. 

In  truth,  enormous  as  was  the  rate  of  depreciation 
established  by  law,  it  did  not  express  the  whole  amount. 
Adams  declared  the  real  depreciation  to  be  twice  as 
much.1  Thacher  writes,2  two  months  after  the  bill  had 
passed,  that  he  had  just  seen  in  a  newspaper  an  adver- 
tisement offering  for  an  article  forty  dollars  per  pound,  or 
three  shillings  in  silver. 

The  following  extract  from  a  London  letter 3  is  a  strik- 
ing picture  of  the  condition  of  the  country  at  that  time, 
though  perhaps  too  highly  colored  in  some  respects. 

"  £10,000  Maryland  currency  worth  .       .       .       .  £6,000 
10,000  Continental  currencj*  worth        .       .       .  100 

Difference  £5,900 

This  was  the  exchange  at  Philadelphia  in  June,  and  as 
they  had  not  then  heard  of  Gates's  defeat,  it  must  be  now 
lower.  Actions  commenced  for  considerable  sums  by 
creditors,  have  been  obliged  to  be  withdrawn,  or  a  non- 
suit suffered ;  a  lawyer  of  eminence,  not  opening  his 
mouth,  in  a  trial  of  consequence,  under  a  fee  of  one 
thousand  pounds,  though  the  legal  fee  is  about  forty, 
and  the  debt,  if  recovered,  being  paid  in  continental 
money,  dollar  for  dollar,  worth  now  but  a  penny,  the 
difference  between  a  penny  and  4s.  6d.  sterling,  is  lost 
to  the  receiver.     The  Congress  having  called  in  the 

1  Works,  vol.  i.  p.  314;  ibid.,  appendix,  p.  654. 

2  May,  1780,  Thacher' s  Military  Journal,  p.  231. 

8  November,  1780,  Newspaper  Cuttings,  vol.  vi.  p.  145,  N.  Y.  Hist. 
Library. 


138        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1780. 

former  emissions,  forty  dollars  for  one,  and  giving  that 
one  in  paper,  cuts  off  every  hope  it  will  hereafter 
appreciate. 

"  Instead  of  the  creditor  pursuing  the  debtor  with  an 
arrest,  the  debtor  pursues  the  creditor  with  a  tender  of 
continental  money,  and  forces  the  bond  out  of  his  hand. 
Hence  it  appears  what  the  best  of  fortunes  in  that  coun- 
try are  reduced  to,  —  an  unpleasing  reflection  it  must  be ; 
for  time,  which  lightens  all  other  losses,  aggravates  the 
loss  of  fortune.  Every  day  we  feel  it  more,  because  we 
stand  more  in  the  want  of  the  conveniences  we  have  been 
used  to.  On  the  other  hand,  new  fortunes  are  made  on 
the  ruin  of  old  ones.  War  which  keeps  the  spirits  in 
motion,  has  diffused  a  taste  for  gayety  and  dissipation. 
The  French  resident  gives  a  rout  twice  a  week  to  the 
Philadelphia  ladies,  amongst  whom  French  hair-dressers, 
milliners  and  dancers,  are  all  the  ton.  The  Virginia  jig 
has  given  place  to  the  cotillon,  and  minuet  de-la-cour. 
The  congress  are  fallen  into  general  contempt,  for  their 
want  of  credit  and  power ;  the  army  is  absolute,  and  has 
declared  it  will  not  submit  to  a  peace  made  by  congress  ; 
the  people  grumble,  but  are  obliged  to  surrender  one 
piece  of  furniture  after  another,  even  to  their  beds,  to 
pay  the  taxes."  The  correspondent  closes  with  a  reflec- 
tion, which,  however  hopeful  and  pleasing  it  may  have 
been  to  his  countrymen  when  first  received,  did  not  prove 
to  be  true.  "  After  all,  a  power  drawn  from  such  distant 
and  dissonant  parts  cannot  form  a  perfect  Union."  Nor 
was  he  less  certain  of  his  country's  ultimate  triumph. 

The  new  emissions,  issued  with  much  confidence  by 
Congress  upon  the  credit  of  the  States,  did  not  meet 


1780.] 


HOW  PAPER  MONEY  WAS  RECEIVED. 


139 


everywhere  with  a  welcome  reception.  Josiah  Quincy1 
wrote  not  long  after  to  Washington,  "  Our  new  paper 
money,  issued  by  recommendation  of  congress,  no  sooner 
began  to  circulate,  than  two  dollars  of  it  were  given  for 
one  hard  one.  To  restore  the  credit  of  paper,  by  making 
it  a  lawful  tender,  by  regulating  acts,  or  by  taxes,  are 
political  manoeuvres  that  have  already  proved  abortive, 
and  for  this  obvious  reason,  —  that,  in  the  same  propor- 
tion as  ideal  money  is  forced  into  currency,  it  must,  from 
the  nature  of  every  thing  fraudulent,  be  forced  out  of 
credit.  ...  I  am  firmly  of  the  opinion,  and  think  it 
entirely  defensible,  that  there  never  was  a  paper  pound, 
a  paper  dollar,  or  a  paper  promise  of  any  kind,  that 
ever  yet  obtained  a  general  currency,  but  by  force  or 
fraud,  generally  by  both.  That  the  army  has  been 
grossly  cheated;  that  creditors  have  been  infamously 
defrauded ;  that  the  widow  and  fatherless  have  been 
oppressively  wronged  and  beggared ;  that  the  gray  hairs 
of  the  aged  and  the  innocent,  for  want  of  their  just  dues, 
have  gone  down  with  sorrow  to  their  graves,  in  conse- 
quence of  our  disgraceful  depreciated  paper  currency,  — 
may  now  be  affirmed,  without  hazard  of  refutation ;  and, 
I  wish  it  could  be  said,  with  truth,  that  the  war  has  not 
thereby  been  protracted.  May  it  not,  therefore,  be  safely 
concluded  that  no  kind  of  paper  currency  is  adequate 
to  the  purpose  of  collecting  and  combining  the  forces 
of  the  United  States  for  their  common  defence  ?  " 2 

1  Nov.  27,  1780,  Sparks' s  Letters  to  Wash.,  vol.  iii.  p.  157. 

2  Charles  Petit,  acting  quartermaster-general,  wrote  from  Phila- 
delphia, July  13,  1780,  "The  new  money  of  this  state  circulates  but 
slowly,  and  as  yet  heavily,  but  it  is  working  its  way  and  gaining  some 


140        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 


The  General  Assembly  of  Massachusetts,  by  resolving 
to  pay  the  new  emissions  at  one  and  seven-eighths  ex- 
change for  hard  money,  sowed  such  a  distrust  among 
the  people  of  the  intention  of  the  State  to  disregard  its 
new  promise,  that  Sullivan 1  wrote  in  August  of  the  same 
year,  "  The  money  is  now  no  more  a  currency  than  the 
ragged  remains  of  a  kite."  He  then  proceeds  to  criti- 
cise intelligently,  but  with  no  slight  severity,  the  policy 
of  the  government.  "  There  is  not  hard  money  enough 
to  carry  on  commerce,  and  a  tax  is  ordered,  which  will 
call  in  all  the  new  emissions.  But  when  this  is  in  the 
treasury,  it  will  be  of  no  avail  to  the  support  of  the 
army.  And  the  authors  of  this  distressing  measure  do 
not  pretend  that  there  will  be  any  other  fruit  of  it  than 
the  sinking  of  the  new  emission.  So  that,  while  our 
army  are  disbanding  themselves  for  want  of  necessaries, 
we  are  loading  the  people  with  taxes  to  redeem  bills  of 
credit  that  were  not  to  be  redeemed  until  the  end  of  six 
years,  and  exhausting  our  treasury  of  hard  money  to 
support  the  credit  of  a  currency  which  is  dead  as  an 
almanac  of  the  last  century-;  dead  beyond  all  the  powers 
of  resuscitation." 

strength.  Tradesmen  and  common  people  are  shy  and  fearful  of  it, 
and  therefore  it  does  not  obtain  so  ready  a  currency  in  small  affairs  as 
was  expected.  Were  it  ever  so  flippant  in  its  passage,  the  whole 
amount  is  far  short  of  the  supplies  expected  from  this  state,  and  the 
money  arising  from  taxes  has  so  many  other  pores  to  supply  that  we 
are  hardly  sensible  of  any  benefit  from  it."  (Greene's  Life  of  Greene, 
vol.  ii.  p.  313.)  President  Reed  wrote  to  the  commissaries  of  purchases, 
"We  have  now  full  confidence  that  this  money  will  pass  as  gold  and 
silver  and  therefore  direct  you  not  to  exceed  upon  any  account  the 
gold  and  silver  price"  [Penn.  Archives,  vol.  viii.  p.  277). 
1  Aug.  4,  1781,  Amory's  Life  of  Sullivan,  vol.  ii.  p.  380. 


1781.]  HOW  PAPER  MONEY  WAS  RECEIVED.  141 

Indeed,  the  new  emission  fell  so  rapidly  in  value  that 
no  computation  could  accurately  mark  the  decline.  A 
bushel  of  wheat  was  worth  at  one  period  seventy-five 
dollars;  coffee  was  sold  for  four  dollars  a  pound,  and 
sugar  for  three-fourths  of  the  latter  sum.1 

It  was  useless  to  repeat  experiments  in  this  direction. 
As  Pelatiah  Webster2  says,  "The  people  of  the  states 
had  been  worried  and  fretted,  disappointed  and  put  out 
of  humor  by  so  many  tender  acts,  limitations  of  prices, 
and  other  compulsory  methods  to  force  value  into  paper 
money,  and  compel  the  circulation  of  it,  and  by  so  many 
vain  funding  schemes,  declarations,  and  promises,  all 
which  issued  from  congress,  but  died  under  the  most 
zealous  efforts  to  put  them  into  operation  and  effect,  that 
their  patience  was  all  exhausted.  .  .  .  They  appeared 
heartless  and  almost  stupid  when  their  attention  was 
called  to  any  new  propositions."  Faith  in  paper  money 
was  gone,  Congress  had  forced  it  upon  the  people  for  four 
years  in  spite  of  continual  depreciation ;  but  the  time  had 
come  when  Congress  could  do  so  no  longer.  The  day 
of  paper  money,  with  all  its  dreadful  evils,  the  worst  of 
which  are  yet  to  be  related,  was  over,  never  to  re-appear, 
as  those  worthy  fathers  thought,  but  which,  contrary  to 
their  hopes,  and  in  spite  of  their  most  determined  efforts 
to  prevent  it,  was  revived  a  century  later,  attended  by 
the  same  inevitable,  though  perhaps  not  equally  distress- 
ing results. 

Paper  money  continued  to  circulate  to  some  extent 
among  the  people  through  the  greater  part  of  1781,  and, 

1  Amory's  Life  of  Sullivan,  vol.  i.  p.  121. 

2  Political  Essays,  p.  110,  note  I. 


142 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 


by  the  government  was  received  for  a  still  longer  period.1 
The  old  emissions  were  refused  by  the  army  in  Septem- 
ber, 1780,2  and  toward  the  close  of  May  the  next  year,  a 
mercantile  house3  in  Boston  informed  an  individual  in 
Philadelphia  that  "Continental  paper  still  passes  with 
some  people  and  a  great  speculation  might  be  made,  if 
any  one  had  a  large  quantity  of  paper  by  them,  but  not 
else  as  no  credit  is  given  even  for  an  hour."  Thus,  credit 
had  been  completely  paralyzed  and  destroyed  by  using 
paper  money.  The  people  would  have  their  eyes  open, 
ere  long,  the  correspondent  affirmed,  and  then  it  would 
not  pass  at  all  with  any,  except  at  the  Philadelphia 
exchange. 

About  the  same  time,  William  Cooper,4  writing  from 
Boston,  to  his  brother  in  Philadelphia,  says,  "  The  old 

1  Gerry  writes  from  Marblehead,  Mass.,  May  20,  1781,  "Since  Tues- 
day last  the  old  emissions  have  not  the  least  circulation  in  this  state." 
A  considerable  sum  he  had  recently  exchanged  through  an  agent  at 
seventy-five.    Almon's  Rememb.,  1781,  part  2,  p.  112. 

2  Saffell' s  Records  of  Rev.  War,  pp.  77,  78.  "The  Penn  line  desire 
to  have  their  depreciation  made  up,  and  that  at  60  instead  of  40  for  1, 
and  to  receive  money  that  other  people  will  take  from  them,  and  in 
such  quantities  that  it  may  answer  some  purpose.  Nothing  but  the 
general's  order  would  induce  some  of  the  regiments  to  take  it."  (Ex- 
tract  from  Letter  of  John  Pierce,  Paymaster,  dated  Peekskill,  Aug.  1, 
1780,  Saffell,  p.  75.)  Pierce  writes,  Sept.  1,  the  same  year,  "I  have 
paid  the  army  as  far  as  the  money  has  gone  for  Jan.  Feb.  and  March; 
my  cash  is  now  exhausted,  and  I  want  about  400,000  dollars  to  complete 
the  payment.  The  army  would  not  receive  it  but  on  account,  which 
was  accordingly  entered  into  the  warrants  to  be  so,  agreeable  to  a  resolve 
of  congress  of  the  10th  of  April  last."    (Saffell,  p.  77.) 

8  John  R.  Livingston  &  Co.,  May  23,  Almon's  Rememb.,  1781,  part 
2,  p.  115. 

*  May  19,  1781,  Ibid.,  p.  116. 


1781.]  HOW  PAPER  MONEY  WAS  RECEIVED.  143 


bills,  so  called,  are  within  this  week  greatly  depreciated, 
owing  to  large  quantities  of  that  money  poured  into  this 
state  from  Philadelphia.  Goods  are  much  risen,  and  I 
suppose  they  must  be  also  at  Philadelphia.  Dollars,  till 
lately  were  seventy-five  for  one,  the  southern  gentry  have 
offered  one  hundred  and  twenty  of  the  old  bills  for  one 
hard  dollar,  and  indeed,  I  scarce  know  what.  We  are  at 
present  in  great  confusion ;  the  takers  refuse  it,  and  this 
morning  there  is  a  cry  for  bread."  To  such  a  deplorable 
condition  had  paper  money  finally  brought  the  people. 

In  September,  1781,  Sullivan1  wrote  from  Springfield, 
"  Paper  money  is  not  even  mentioned  in  trade  ;  but  one 
is  given  for  four,  in  order  to  pay  the  present  state  tax. 
There  is,  however,  a  scarcity  of  silver  that  reduces  the 
price  of  goods  very  fast,  and  it  seems  the  general  opinion 
that  there  shall  be~  no  more  paper  currency.  However, 
the  treasurer  pays  it  out  as  fast  as  it  comes  in,  and  unless 
the  general  assembly  puts  a  stop  to  that,  it  will  again  be 
in  circulation,  and  again  depreciate." 

The  final  blow  was  given  by  merchants  and  brokers 
in  the  Southern  States,  who,  apprehensive  of  the  ap- 
proaching fate  of  the  paper  currency,  pushed  immense 
quantities  of  it  suddenly  into  New  England,  making 
enormous  purchases  with  it,  whereupon  "instantly  the 
bills  vanished  from  circulation." 2  For  several  years  after 
their  circulation  ceased,  the  holders  regarded  them  as  a 
part  of  the  national  debt,  which  they  believed  would  be 
paid  in  gold  and  silver.  They  expected  to  receive,  not  the 
specie  value  of  the  bills,  but  their  worth  in  specie  at  the 

1  To  Benjamin  Lincoln,  Amory's  Life  of  Sullivan,  vol.  ii.  p.  382. 

2  Noah  Webster,  Coll.  of  Essays,  p.  191. 


144        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 

time  they  were  received  by  the  holders,  with  interest 
at  six  per  cent  per  annum.  Most  of  the  French  pos- 
sessing paper  money  deposited  it  with  the  French  minister 
or  council  at  New  York,  that  payment  might  be  demanded 
whenever  Congress  should  appropriate  funds  for  that  pur- 
pose. Speculators,  however,  purchased  the  bills,  as  well 
as  every  other  form  of  public  indebtedness,  expecting, 
of  course,  to  reap  a  rich  reward  in  due  time  from  the 
operation.1 

Occasionally,  paper  money  was  exchanged,  even  as  late 
as  1782,  to  a  very  small  extent,  at  an  enormous  discount, 
but  merely  to  serve  special  local  purposes.2 

Having  exhausted  the  magical  power  of  the  printing- 
press,  the  reader  may  be  somewhat  curious  to  learn  how 
the  people  supplied  themselves  with  money,  or  whether 
they  made  exchanges  without  the  intervention  of  a  cir- 
culating medium.  President  Reed  of  Pennsylvania,  one 
of  the  leaders  of  the  Revolution,  —  and  whose  corre- 
spondence and  official  papers  containing  reference  to  the 
financial  questions  of  the  time  evince  a  mastery  of 
them,  —  communicated  to  Mr.  Searle,3  who  was  then 
abroad  trying  to  negotiate  a  loan  for  that  State,  "  The 
paper  money  has  at  length  found  its  ne  plus  ultra;  a 
total  loss  of  confidence  and  credit,  arising  from  a 
variety  of  causes,  to  some  of  which  you  cannot  be 
a  stranger,  gave  it  an  honorable,  and,  what  you  will, 

1  Jefferson's  Letter  to  Morliene,  June  3,  1786,  Works,  vol.  i.  p.  578. 
In  the  same  letter  he  declared  that  it  was  six  years  since  the  paper 
money  of  New  England  had  ceased  to  circulate  as  money. 

2  Writings  of  Madison,  vol.  i.  p.  60. 

8  "In  the  spring  of  1781,"  Reed's  Life  of  Reed,  vol.  ii.  pp.  293, 
295. 


1781.] 


HOW  PAPER  MONEY  WAS  RECEIVED. 


145 


perhaps,  think  more  extraordinary,  a  peaceful  exit  about 
three  months  ago.  I  believe  the  history  of  the  world 
affords  no  instance  of  such  a  transition.  At  this  time 
all  dealings,  and  commerce  of  every  kind  are  carried  on 
in  gold  and  silver ;  paper  having,  in  its  turn,  become  a 
merchandise,  and  kept  for  some  time  at  an  exchange  of 
four  or  five  for  one.  You  will  naturally  ask  how  this 
has  been  effected,  and  where  have  you  found  a  sufficient 
and  ready  substitute.  I  answer,  it  was  effected  really 
and  truly  by  the  people  themselves  gradually  depreciating 
the  money  till  the  exchange  rose  to  two  hundred  and 
fifty  and  three  hundred  for  one.  Ostensibly  it  was 
occasioned  by  a  declaration  of  the  Supreme  Executive 
Council  that  it  should  be  received  in  public  payments 
at  a  ratio  of  one  hundred  and.  seventy-five  for  one.  At 
once,  as  if  by  that  force  which,  in  days  of  ignorance, 
would  be  ascribed  to  enchantment,  all  dealings  in  paper 
ceased.  Necessity  forced  out  the  gold  and  silver  —  a 
fortunate  trade  opened  at  the  same  time  to  the  Havana 
for  flour,  all  restrictions  were  taken  off,  and  the  Mexi- 
can dollars  flowed  in  by  thousands;  this  supported  the 
sinking  spirits  of  those  who  would  have  been  discontent- 
ed and  uneasy,  and  in  a  few  days,  specie  became  the 
universal  medium,  and  so  continues.  Every  one  is  sur- 
prised at  the  change.  Our  enemies,  both  external  and 
internal,  who  promised  themselves  tumults,  insurrections 
and  revolt,  hang  their  heads  in  despondency  and  despair. 
A  general  system  of  economy  and  frugality  will  be  a 
natural  consequence  of  the  money  finding  a  settled 
value,  and  we  may  with  reason  hope  soon  to  find  our- 
selves on  the  same  principles  as  other  nations." 


146        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 

The  truth  of  the  sketch  here  given  of  the  peaceful 
exit  of  paper  money  and  the  sudden  re-appearance  of 
specie  is  amply  confirmed  by  other  testimony.  Evidently 
the  principles  governing  the  circulation  of  money  were  a 
perplexing  mystery  to  most  of  our  revolutionary  fathers ; 
and  even  now  the  haze  has  not  entirely  cleared  away 
before  every  eye. 


1776.] 


STATE  VERSUS  CONTINENTAL  ISSUES. 


147 


CHAPTER  X. 

STATE  VERSUS  CONTINENTAL  ISSUES. 

TflE  Colonies  had  issued  paper  money  long  before  any 
one  had  dreamed  of  establishing  a  Confederate  Govern- 
ment. Massachusetts  was  the  first  Colony,  and  put  forth 
an  emission  after  the  return  of  the  ill-fated  Louisburg  ex- 
pedition in  1690.  Though  the  experiment  partly  failed, 
it  was  successful  enough  to  cause  constant  repetition. 
The  fact,  however,  was  soon  discovered,  that,  whenever 
any  Colony  issued  more  than  a  very  limited  amount  of 
paper  mone}r,  it  always  depreciated:  the  States,  there- 
fore, ought  to  have  abstained  from  further  issues  when 
the  Continental  bills  appeared.1  The  two  issues  were  in 
direct  conflict,  and,  if  the  States  continued  to  send  forth 
their  supplies  as  though  Congress  had  no  thought  of 
doing  the  same  thing,  of  course  the  values  of  both  kinds 
would  decline  more  speedily.  /  Yet  the  needs  of  the  Colo- 
nies were  so  pressing,  that,  before  the  close  of  1775,  every 
one  of  them,  from  Massachusetts  to  Georgia,  had  joined 
in  swelling  the  stream  of  paper  money. 

1  Madison  entertained  an  intelligent  view  of  the  causes  affecting  the 
value  of  paper  money.  "  It  depends  on  the  credit  of  the  State  issuing 
it,  and  on  the  time  of  its  redemption ;  and  is  no  otherwise  affected  by 
the  quantity  than  as  the  quantity  may  be  supposed  to  endanger  or  post- 
pone the  redemption."  Written  prior  to  March,  1780.  Writings,  vol. 
iv.  p.  462. 


148        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1777. 


Not  content  with  issues  of  the  States  and  the  General 
Government,  private  issues  of  tokens,  certificates,  &c, 
for  small  change,  were  sent  forth  by  individuals,  which 
debased  still  more  the  quality  of  the  paper  flood.  The 
evil  grew  so  alarming  in  New  York,  that  the  Committee 
of  Safety  resolved  not  to  receive  such  money,  and  warned 
the  people  against  accepting  it.1  Virginia  declared  it  to 
be  a  penal  offence  to  issue  or  receive  such  tickets,  and 
other  Colonies  took  similar  action.2 

Congress  doubtless  saw  in  the  beginning  how  the  value 
of  Continental  money  was  affected  by  the  action  of  the 
States  in  issuing  bills  of  credit;  but  whether  this  body 
dared  not  recommend  the  States  to  stop,  or  whether  the 
evil  was  not  sufficiently  alarming  to  render  such  a  recom- 
mendation necessary,  or  whether,  after  all,  the  members 
were  very  slow  in  seeing  how  the  State  and  Continental 
issues  clashed,  no  effort  was  put  forth  to  prevent  the  evil 
until  Feb.  15,  1777,  when  Congress  recommended  the 
States  to  stop  issuing  bills,  recall  those  already  emitted, 
and  rely  wholly  upon  the  paper  money  which  Congress 
should  provide  for  the  country.  This  was  wise  action 
surely,  and  it  was  one  of  the  very  few  recommendations 
of  Congress  which  the  States  either  wholly  or  in  part 
followed.  All  of  the  States  ceased  to  emit  any  more 
paper  money ;  and  some  of  them  remained  true  to  the 
recommendation  of  Congress  nearly  four  years.3  How 
far,  however,  they  went  in  contracting  or  redeeming  their 
issues,  we  have  been  unable  to  discover. 

On  the  22d  of  November,  1777,  Congress  repeated  the 

1  Am.  Archives,  fourth  series,  vol.  vi.  p.  990.        2  Phillips,  p.  46. 
8  Arnold's  Hist,  of  R.  I.,  vol.  ii.  p.  458. 


1777.] 


STATE  VERSUS  CONTINENTAL  ISSUES. 


149 


recommendation,  and  urged  the  States  to  refrain  from 
emitting  any  more  bills  of  credit,  and,  where  a  sufficient 
quantity  of  Continental  bills  existed  to  serve  as  a  cir- 
culating medium,  forthwith  to  recall  by  loan  or  taxes 
their  State  issues,  and  to  cancel  them,  small  bills  less 
than  a  dollar  excepted,  which  were  needed  for  change. 

As  associations  had  been  formed  in  some  places  for 
preserving  the  value  and  credit  of  bills  issued  by  the 
Colonies  sustained  by  the  British  crown,  thus  lessening 
the  value  of  the  Continental  issues  and  those  of  the 
States  not  relying  on  any  such  authority,  Congress  finally 
recommended1  the  States  to  call  in  all  notes  issued  by 
them  prior  to  the  19th  of  April,  1775,  and  to  declare  such 
as  were  not  delivered  within  a  reasonable  time  to  be 
irredeemable. 

i  Dec.  3,  1777. 


150        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1776. 


CHAPTER  XI. 

COUNTERFEITING. 

The  Continental  bills  would  have  rapidly  sunk  by- 
reason  of  the  enormous  quantity  issued,  even  if  they  had 
not  been  weighted  in  any  other  manner;  but,  not  long 
after  the  appearance  of  the  first  issues,  the  county  was 
inundated  with  counterfeits  which  found  their  way  among 
the  people,  and  hastened  the  depreciation  and  fall  of  paper 
money.  The  subject  first  received  the  attention  of  the 
New-York  Provincial  Congress,  as  the  offenders  princi- 
pally flourished  within  the  jurisdiction  of  that  State. 
Their  headquarters  were  at  Cold  Springs,  on  Nassau 
Island,  where  they  were  captured ;  but  the  destruction 
of  this  nest  of  counterfeiters  by  no  means  effectually 
ended  the  practice.  The  Jersey  delegation  presented  to 
Congress  a  number  of  counterfeits,  which  doubtless 
created  gloomy  forebodings  in  that  body,  and  led  to  the 
appointment  of  a  committee  to  consider  what  remedy 
could  be  effectively  applied.  The  Legislatures  were 
recommended1  to  pass  laws  against  counterfeiting,  and, 
content  with  this  action,  Congress  took  no  further  steps 
for  a  considerable  period. 

Although  the  States  promptly  complied  with  the  rec- 
ommendation of  Congress  in  respect  to  counterfeiting,  the 

i  June  24,  1770. 


1777.] 


COUNTERFEITING. 


151 


counterfeiters  continued  their  unhallowed  occupation,  for 
doubtless  their  gains  were  large  and  tempting.  Counter- 
feiting, however,  was  not  confined  solely  to  individuals. 
The  British  Government  also  embarked  in  the  business. 
Gen.  Howe  abetted  and  patronized  those  who  were 
engaged  in  making  and  pushing  these  spurious  issues 
into  circulation.  In  the  same  papers  which  published 
British  official  documents  and  proclamations  might  be 
found  advertisements  like  the  following :  — 

Persons  going  into  the  other  colonies ;  may  be  supplied 
with  any  number  of  counterfeited  congress  notes  for  the  price 
of  the  paper  per  ream.  They  are  so  nearly  and  exactly  exe- 
cuted that  there  is  no  risk  in  getting  them  off,  it  being  almost 
impossible  to  discover  that  they  are  not  genuine.  This  has 
been  proved  by  bills  of  a  very  large  amount  which  have  been 
successfully  circulated.1 

"A  shipload  of  counterfeit  continental  money,"  says 
Phillips,2  "  coming  from  Britain,  was  captured  by  an 
American  privateer.  Persons  accompanying  an  English 
flag  of  truce  are  known  to  have  largely  made  use  of  the 
opportunity  for  disseminating  the  fraudulent  notes ;  emis- 
saries from  New  York  endeavored  to  obtain  from  the 
mills,  paper  similar  to  that  used  by  congress  for  its 
emissions." 

Many  in  Great  Britain  and  elsewhere  believed,  that,  if 
Continental  paper  money  could  be  destroyed,  the  Ameri- 
cans would  be  obliged  to  submit,  from  lack  of  funds  to 

1  H.  Gaine's  Gazette,  April,  1777,  cited  in  Moore's  Diary  of  the 
American  Rev.,  vol.  i.  p.  440. 

2  Cont.  Paper  Money,  p.  71. 


152        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1777. 

maintain  their  cause.  This  is  why  the  British  Govern- 
ment promoted  so  extensively  the  business  of  counter- 
feiting. But  Gen.  Clinton  wrote  truthfully,  in  January, 
1780,  "  Every  day  teaches  me  the  futility  of  calculations 
founded  on  its  failure."  Great  Britain  had  not  yet 
fathomed  the  depth  of  American  patriotism,  what  the 
people  were  willing  to  suffer  to  acquire  independence ; 
nor  had  the  mother-country  reckoned  accurately  the  aid 
which  France  was  to  bestow.  Clinton,  who  was  on  the 
ground,  saw  with  more  discerning  eyes :  the  Revolution 
was  not  to  fail,  even  if  the  nation  did  become  bankrupt.1 

1  This  entire  letter  discloses  the  clearness  of  his  vision  and  judgment: 
"No  experiments  suggested  by  your  Lordship;  no  assistance  that  could 
be  drawn  from  the  power  of  gold,  or  the  arts  of  counterfeiting  have  been 
left  unattempted.  But  still  the  currency,  like  the  widow's  cruise  of  oil, 
has  not  failed  the  congress.  My  hopes  on  this  head,  I  must  acknowl- 
edge, were  much  higher  twelve  months  since  than  to-day.  With  the 
appearance  of  an  enormous  quantity,  still  it  is  all  the  debt  which  the 
people  have  to  struggle  with;  and  in  this  view,  and  when  compared 
with  that  of  other  nations,  it  shrinks  into  a  very  inconsiderable  sum. 
The  people  begin  to  be  sensible  of  this;  but  on  the  other  hand,  all  men, 
even  the  friends  of  the  British  government,  residing  in  the  Rebel  states, 
would  be  unwise  sufferers,  did  the  money  fall  to  the  ground  without  a 
substitute.  The  different  acts  of  the  states,  which  made  it  a  lawful 
tender,  forced  it  into  every  pocket.  The  continuance  of  the  war;  the 
almost  total  disappearance  of  specie,  and  the  necessity  there  was  for 
employing  some  medium  for  trade,  or  auxiliary,  in  the  way  of  barter, 
assisted  further  in  its  general  promulgation,  till  at  length  every  indi- 
vidual found  it  his  interest,  so  closely  connected  with  its  value,  that  it 
is  candidly  my  sentiment,  no  efforts  of  ours  can  make  it  less.  If  it  is  to 
be  destroyed  at  all,  it  can  only  be  by  congress;  and  in  this  case,  it  will 
undoubtedly  be  succeeded  by  some  substitute  more  valuable  and  perma- 
nent." Willing,  nay,  eager,  to  do  any  act  which  would  be  likely  to 
weaken  America,  he  concludes,  "I  shall,  nevertheless,  my  Lord,  con- 
lint;*  assiduous  in  the  application  of  those  means  intrusted  to  my  care; 


1777.] 


COUNTERFEITING. 


153 


Nevertheless,  large  quantities  of  the  forged  paper  were 
circulated,  and  once  more  was  the  attention  of  Congress 
called  to  the  subject.  No  further  action,  however,  was 
taken  to  protect  the  issues  of  the  government:  perhaps 
Congress  was  unable  to  devise  any  method  for  suppress- 
ing the  evil. 

Nor  did  the  State  issues  escape  the  attention  of  the 
counterfeiter.1  The  wife  of  John  Adams  writes  to  him 
on  the  9th  of  May,  1777,2  "A  most  horrid  plot  has 
been  discovered  of  a  band  of  villains  counterfeiting  the 
Hampshire  currency  to  a  great  amount.  No  person 
scarcely  but  what  has  more  or  less  of  these  bills." 
Adams  in  his  reply  alludes  to  "  a  counterfeit  continental 
bill  abroad,  sent  out  of  New  York,"  but  adds  that  "  it 
will  deceive  none  but  fools,  for  it  is  a  copper  plate,  easily 
detected,  miserably  done."  3 

Although  the  forgeries  were  poorly  executed,  so  many 
counterfeits  were  pushed  into  circulation,  especially  of 
the  bills  dated  May  20,  1777,  and  April  11,  1778, 
that  Congress  resolved4  to  retire  these  two  emissions. 
They  were  to  be  received  for  taxes,  and  in  exchange  for 
other  bills,  until  a  certain  period,  after  which  they  were 
to  be  irredeemable.  The  notes  thus  withdrawn  were 
disfigured,  effectually  preventing  their  further  circulation ; 
while  the  time  fixed  for  receiving  and  exchanging  them, 

if  they  cannot  work  its  destruction,  yet  they  can  embarrass  government, 
and  make  the  carrying  on  the  war  more  precarious,  burdensome  and  less 
energetic."  —  Almon's  Eememb.,  1780,  part  2,  p.  40. 

1  A  person  was  convicted  at  Middletown,  Conn.,  for  counterfeiting 
the  bills  of  that  State,  and  sentenced  to  "four  years  confinement  in 
New  Gate  prison."    Continental  Journal,  Jan.  30,  1777. 

2  Familiar  Letters,  p.  269.         3  Ibid.,  278.         4  Jan.  2,  1779. 


154        FINANCIAL  HISTORY  OF  THE  UNITED  STATES  *  [1778. 

which  was  the  1st  of  June,  1779,  was  afterward  extended 
to  1780.  To  facilitate  their  withdrawal,  the  managers  of 
the  lottery  were  directed  to  receive  them,  and  the  pay- 
masters of  the  army  to  exchange  them;  associations  of 
citizens  also  were  formed  for  the  same  purpose.1 

The  effect  of  this  measure  was  probably  a  surprise  to 
every  one,  and  is  a  fine  illustration  of  human  inability 
to  foresee  the  quality  of  fruit  which  public  measures 
enacted  with  the  best  motive  and  apparently  soundest 
wisdom  may  sometimes  bring  forth.  Counterfeiting  these 
emissions  had  become  so  general,  that  this  seemed  a 
very  easy  and  practical  way  of  circumventing  the  forgers, 
simply  by  withdrawing  them.  But  what  happened 
in  consequence  of  doing  this?  The  immediate  effect 
was  to  discredit  all  notes  bearing  these  dates,  —  the 
genuine  as  well  as  the  spurious  issues.  It  is  true  that 
merchants  and  others  possessing  unsalable  property  were 
willing  to  take  the  bills  by  way  of  exchange,  and  the 
newspapers  of  the  day  teemed  with  advertisements  con- 
taining offers  of  this  character.  The  way  in  which  this 
order  was  received  is  spiritedly  depicted  in  the  following 
letter : — 

"  How  comes  it  that  congress,  by  their  resolve,  relative 
to  the  two  emissions  of  May,  1777,  and  April,  1778,  have 
set  the  country  in  such  a  ferment,  and  given  room  for  a 
set  of  speculating  people  who  are  enemies  to  the  real 
good  of  their  country,  to  take  occasion  from  it  to  depre- 
ciate the  value  of  those  two  emissions  in  the  manner  they 
have  done,  and  are  now  daily  doing.  .  .  .  There  are  a  set 
of  them  here  very  busy  in  this  matter ;  and  by  their  man- 

1  Penn.  Gazette,  Jan.  21,  1779. 


1778.] 


COUNTERFEITING. 


155 


agement  within  this  day  or  two  it  is  rendered  twenty-five 
p.  cent  worse  than  the  other  emissions,  which  God  knows 
were  sunk  low  enough  before.  .  .  .  Our  butchers,  bakers, 
and  farmers  begin  to  refuse  it  entirely,  owing  to  the 
stories  propagated  about  it.  Must  people,  who  have  this 
money,  either  lose  a  fourth  of  it  or  starve  ?  and  when  the 
time  comes  for  exchanging  it,  must  they  spend  half  of 
the  value  of  the  little  they  have  in  taking  it  to  Philadel- 
phia to  place  it  in  the  office?  and  after  that  wait  sixty 
days  and  attend  a  second  time  for  payment?  Indeed,  I 
think  the  resolve  is  not  one  the  wisest,  and  wish  to  see 
these  evils  speedily  remedied.  .  .  .  The  merchants,  or 
rather  hucksters,  of  Philadelphia,  are  playing  the  game 
there.  Surely,  congress  can  call  in  these  or  any  other 
emissions  in  a  manner  less  injurious  to  the  country."  1 

Robert  Rutherford2  also  wrote  to  Washington  from 
Virginia,  "  It  is  with  much  concern  I  find  the  resolve  of 
congress,  respecting  the  money  emissions  of  May  20th, 
1777,  and  April  11th,  1778,  giving  great  and  general 
alarm,  tending  to  depreciate  the  currency,  as  the  holders 
of  these  emissions  are  really  deprived  of  the  use  of  their 
money  for  six  months,  as  it  in  a  great  measure  ceases  to 
pass  here  in  payments ;  .  .  .  Assuredly  Congress  have 
not  taken  the  whole  matter  into  the  account,  and  I  am 
informed  that  large  sums  of  this  money  are  now  in  pos- 
session of  the  subjects  of  Spain  upon  the  Mississippi,  they 
being  enjoined  by  the  governor  of  Orleans  to  receive  it, 
not  to  mention  many  other  obvious  objections ;  so  that 
I  am  sensible  it  will  be  consistent  with  the  wonted  jus- 

1  Perm.  Archives,  vol.  vi.  p.  212. 

2  Sparks' s  Letters  to  Wash.,  vol.  ii.  p.  252. 


156        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 

tice  and  prudence  of  that  august  body,  without  loss  of 
time,  to  revise  and  greatly  change  the  terms  of  that 
resolve." 

Another  evil  attending  the  measure  was  the  loss  to 
exchangers  from  the  depreciation  of  their  money  during 
the  period  required  to  effect  exchanges.  Several  months 
elapsed  before  these  could  be  made  by  persons  living  far 
away  from  Philadelphia :  as  paper  money  was  now  rapidly 
depreciating,  of  course  the  loss  must  have  been  very 
considerable. 

The  case  would  not  have  been  quite  so  bad  if  the 
genius  and  enterprise  of  the  counterfeiters  had  been 
wholly  expended  in  making  bogus  paper  money.  But 
they  were  not  content  with  working  in  that  direction: 
hard  money,  also,  was  subjected  to  ruinous  manipulation. 
In  one  of  the  newspapers  1  published  during  that  period 
the  following  bit  of  news  is  given :  44  The  unnatural 
enemies  of  this  country,  not  satisfied  with  their  frequent 
but  fruitless  attempts  to  destroy  the  credit  of  our  paper 
currency,  have,  at  length,  introduced  large  sums  of  Coun- 
terfeit Half  Joes  and  Dollars  among  us,  in  order,  to  buy 
up  the  paper  money  and  thereby  stamp  a  discredit  upon 
it ;  but,  thank  God,  this  villany  has  been  detected  in  its 
bud,  though  the  perpetrators  of  the  same  are  still  un- 
known. The  Half  Johannes  are  admirably  well  imitated, 
and  require  the  nicest  observation  to  distinguish  the  gen- 
uine from  the  counterfeit." 

Great  Britain  was  very  confident,  that,  by  ruining  the 
circulating  medium  in  America,  the  people  would  return 
to  their  allegiance :  hence  the  desperation  with  which 

i  Fenn.  Packet,  March  13,  1779. 


1778.] 


COUNTERFEITING. 


157 


counterfeiting  was  practised  by  the  British  agents.  The 
depth  of  the  determination  of  the  people  to  achieve 
independence  had  not  been  accurately  sounded  across 
the  ocean.  The  cause  would  not  be  lost,  even  if  the 
value  of  Continental  paper  money  sank  out  of  sight. 
Yet  so  long  as  paper  money  possessed  any  value,  counter- 
feiters were  busy.  Although  counterfeiting  was  branded 
a  crime  by  all  the  States,  and  a  reward  of  two  thousand 
dollars  was  offered  by  Congress  to  persons  who  should 
"  take  and  prosecute  to  conviction "  all  who  forged  or 
knowingly  attempted  to  pass  counterfeit  money,  the 
practice  assumed  larger  and  more  alarming  proportions 
until  paper  money  ceased  to  have  any  value.1  Counter- 
feiting was  not  the  chief  cause  of  the  depreciation  of 
paper  issues ;  but  it  greatly  aggravated  the  evils  spring- 
ing from  their  use,  and  hastened  their  extinction. 

1  Even  Morris's  own  notes  were  extensively  forged.  See  Lieut.-Col. 
Smith's  Letter  to  Washington,  July  15,  1783,  New  York  in  the  Am. 
Rev.,  p.  142.    Almon's  Rememb.,  1783,  part  1,  p.  126. 


158        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1777. 


CHAPTER  XII. 

LIMITATION  OF  PRICES. 

Paper  money  had  not  been  long  in  circulation  before 
the  prices  of  all  commodities  began  to  rise,  exciting 
alarm,  producing  uncertainty,  and  disturbing  every  cal- 
culation. The  rise  of  prices  was  regarded  a  terrible 
evil ;  and,  to  prevent  this  inevitable  effect  of  the  over- 
issue of  paper  money,  a  remedy  was  applied,  which  in 
the  light  of  these  days  looks  puerile  enough,  but  which 
at  that  earlier  period  found  numerous  supporters.1  This 
remedy  was  to  fix  the  prices  of  all  commodities,  both 
domestic  and  imported,  by  legal  enactment.  This  was 
in  no  sense  a  novel  conception ;  for,  at  an  early  period 
in  New-England  colonial  administration,  the  experiment 
had  been  tried  ;  the  prices  of  labor,2  and  of  almost  every 
thing  forming  the  subject  of  sale  or  exchange,  having 
been  established  by  law.  It  was  a  New-England  idea, 
therefore ;  and,  when  prices  had  risen  to  a  considerable 
height,  representatives  of  the  New-England  States  as- 
sembled at  Providence,  and  formed  a  tariff,  which  was 

1  Yet  Noah  Webster  wrote,  not  long  after  the  Act  limiting  prices  was 
passed,  "  These  regulating  acts  were,  reprobated  by  every  man  acquainted 
with  commerce  and  finance."  —  Coll.  of  Essays,  p.  192. 

2  The  regulation  of  prices  began  in  the  Massachusetts  Colony  as 
early  as  1633.  Winthrop's  Hist,  of  New  England,  vol.  i.  p.  138,  new  edi- 
tion, and  Felt's  Hist,  of  Mass.  Currency,  Index,  Prices  of  Articles  and 
Labor. 


1777.] 


LIMITATION  OF  PRICES. 


159 


adopted  by  all  the  States  represented  in  the  convention.1 
The  plan  was  eagerly  seized  by  Congress,  and  recom- 
mended 2  to  other  States  for  imitation,  in  order  "  to  pre- 
vent the  present  fluctuating  and  exorbitant  prices." 

A  week  before  this  action  of  Congress,  Adams  wrote 
to  his  wife,  that  "  the  attempt  of  New  England  to  regu- 
late prices  is  extremely  popular  in  congress ; "  but  "  for 
my  own  part,"  he  continues,  "  I  expect  only  a  partial 
and  temporary  relief  from  it,  and  I  fear  that  after  a 
time  the  evils  will  break  out  with  greater  violence.  The 
matter  will  flow  with  greater  rapidity  for  having  been 
damned  up  for  a  time,"  the  truth  of  which  opinion  was 
quickly  seen  in  the  swift  march  of  events. 

The  rapid  increase  of  prices  was  generally  condemned 
as  immoral  and  unpatriotic,  and  deserving  severe  punish- 
ment. A  French  officer,3  writing  from  Philadelphia, 
undoubtedly  expressed  the  truth  when  he  remarked, 
"  The  country  people  are  so  exasperated  at  the  high  price 
every  thing  bears,  that  unless  some  change  soon  takes 
place,  they  threaten  not  only  to  withhold  provisions 
from  the  town,  but  to  come  down  in  a  body,  and  punish 
the  leaders." 

Yet  a  few,  at  least,  clearly  saw  why  prices  were  rising. 
The  reason  was,  because  the  value  of  the  money  by 
which  the  prices  of  things  were  measured  was  declining. 
There  was  no  advance  in  prices  previous  to  the  issue 
of  paper  money;   but  when   the   issues  were  greatly 

1  For  report  of  Committee  of  Convention  which  met  at  Providence, 
Dec.  31,  1776,  to  fix  prices,  see  Conn.  Courant,  Jan.  27,  1777. 

2  Feb.  15,  1777. 

3  Baron  de  Bonstellin,  Newspaper  Cuttings,  vol.  v.  p.  215,  N".  Y. 
Hist.  Lib. 


160        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1777. 


multiplied,  and  no  adequate  provision  was  made  for 
their  redemption,  the  prices  of  commodities  increased.1 
This  truth  did  not  seem  so  obvious  to  all  as  it  did  to 
Webster,  who  published  his  opinion  concerning  the 
measure  in  a  very  clear  and  cogent  manner  soon  after 
the  action  of  Congress  above  mentioned.  A  writer  in 
"  The  Boston  Gazette " 2  declares  that  the  depreciation 
of  the  currency  "as  to  its  degree,  has  been  more,  a 
great  deal  the  effect  of  art  than  nature,  and  with  a 
view  to  give  greater  scope  to  the  operations  of  that 
avarice,  which,  if  not  laid  under  restraint,  will  be  the 
ruin  of  the  country.  'Tis  a  real  truth,  that  an  insatia- 
ble thirst  after  gain,  and  not  the  depreciation  of  the 
currency  is  the  grand  cause  of  that  enormous  height 
to  which  the  prices  of  things  has  arisen."  This  opinion 
was  shared  by  many  others;  and  even  Congress,  when 
addressing  the  public,  professed  to  believe  that  paper 
money  had  really  not  depreciated,  but  that  prices  had 
risen  through  the  action  of  speculators  who  were  ac- 
counted the  enemies  of  the  government.  The  real 
causes  for  advancing  prices  were  as  completely  over- 
looked by  that  body  as  they  were  by  Lysias  when 
prosecuting  the  corn-factors  of  Greece.  As  the  Greek 
orator  wholly  attributed  the  dearness  of  corn  to  a  com- 
bination among  the  factors,  so  did  Congress  ascribe  the 
enormous  advance  in  the  price  of  things  to  the  action 
of  those  having  commodities  for  sale. 

Nor  were  the  persons  few  who  believed  in  the  justice 
and  efficacy  of  the  measure  limiting  prices.    An  innocent 

1  Webster,  Political  Essays,  pp.  11-18. 

2  April  G,  1778;  see  Letter  of  Soldier,  Ibid.,  June  25,  1779. 


1777.] 


LIMITATION  OF  PRICES. 


161 


writer  in  "  The  Connecticut  Journal " 1  maintained  that 
prices  ought  to  be  fixed  at  what  they  were  before  the  war, 
and  kept  so  until  the  conflict  was  over.  No  weak  believer 
was  he  in  the  power  of  the  State  to  regulate  prices ;  yet  he 
merely  expressed  the  prevailing  sentiment  of  the  time.2 

Webster,  however,  was  not  alone  in  maintaining  that 
trade  should  be  left  to  regulate  itself;  for  several  mem- 
bers of  Congress  entertained  a  similar  opinion.3  Says  a 
writer  in  "  The  Connecticut  Courant," 4  "  As  to  the 
scheme  of  supporting  the  money  and  regulating  the  price 
of  things  by  penal  statutes,  it  always  has  and  ever  will 
be  impracticable  in  a  free  country,  because  no  law  can  be 
framed  to  limit  a  man  in  the  purchase  or  disposal  of 
property,  but  what  must  infringe  those  principles  of 
liberty  for  which  we  are  gloriously  fighting."  By  Presi- 
dent Reed  the  experiments  were  pronounced  the  "  effu- 
sions of  honest  but  intemperate  zeal  to  sustain  the  credit 
of  the  paper  money."5  Many  other  persons  echoed  the 
same  opinion. 

1  Oct.  14,  1778. 

2  Phillips  declares  that  the  same  opinion  was  held  in  all  the  depart- 
ments of  the  States  and  of  the  Confederacy.  4 'No  considerations  of 
justice,  honor,  religion  or  policy,  or  even  the  experience  of  the  utter 
inefficiency  of  such  measures  could  eradicate  it  from  the  public  mind  " 
{Cont.  Paper  Money,  p.  84).  "It  seemed  to  be  a  kind  of  obstinate  de- 
lirium," said  Webster,  "totally  deaf  to  every  argument  drawn  from 
justice  and  right,  from  its  natural  tendency  and  mischief,  from  common 
sense  and  even  from  common  safety."  To  which  he  added  the  very 
truthful  and  forcible  observation,  "  It  is  not  more  absurd  to  attempt  to 
impel  faith  into  the  heart  of  an  unbeliever  by  fire  and  fagot,  or  to  whip 
love  into  your  mistress  with  a  cowskin,  than  to  force  value  or  credit  into 
your  money  by  penal  laws"  (Political  Essays,  p.  128,  note,  and  p.  132). 

3  Bradford's  Hist,  of  Mass.,  vol.  ii.  p.  172.         4  May  12,  1777. 
5  Reed's  Life  of  Reed,  vol.  ii.  p.  140. 


162        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1777. 

One  of  the  earliest  fruits  of  this  measure  was  the 
secreting  of  goods  by  their  owners.1  This  was  an  unex- 
pected result ;  but  a  quick  though  extremely  rough  and 
characteristic  remedy  was  found  for  what  was  generally 
regarded  a  violation  of  the  spirit  of  the  law.  Stores 
were  opened,  and  the  goods  were  sold  at  fixed  prices  by 
self-constituted  committees.  The  owners  were  accused 
of  conspiring  to  raise  the  price  of  commodities  and  to 
depreciate  the  currency ;  and  Tories,  speculators,  engross- 
ers, and  forestallers,  enemies  of  their  country,  and  many 
other  names  of  a  similar  character,  were  liberally  applied 
to  them.2 

The  measure  soon  encountered  bitter  opposition.  Ad- 
ams writes  from  Philadelphia,3  "  The  merchant  scolds, 
the  farmer  growls,  and  every  one  seems  wroth  that  he 
cannot  grind  his  neighbor."  The  law  from  the  beginning 
was  very  generally  disregarded.  On  the  20th  of  April, 
1777,4  Abigail  Adams  informs  her  husband,  "  The  Act 
which  at  first  was  in  some  measure  regarded  and  stemmed 
the  torrent  of  oppression,  is  now  no  more  heeded  than  if 
it  had  never  been  made."  This  was  only  two  months 
after  Congress  had  recommended  the  other  States  to 
adopt  the  measure.  Yet,  as  the  law  was  broken  so  openly 
and  quickly  in  Boston  and  vicinity,  the  home  of  its 
inception,  no  one  could  reasonably  hope  for  a  better 
execution  of  it  elsewhere. 

The  law  did  not  fail  through  lack  of  effort  to  enforce 
it  in  several,  at  least,  of  the  States.  In  Pennsylvania 
especially,  severe  measures  were  devised  and  executed 

1  Phillips,  p.  83.         2  Webster,  Political  Essays,  p.  11,  note. 

8  Feb.  8,  1777,  Familiar  Letters,  p.  243.       4  Familiar  Letters,  p.  262. 


17T9.] 


LIMITATION  OF  PRICES. 


163 


for  enforcing  the  Act.  A  public  meeting  was  held  at 
Philadelphia  in  May,  1779,  at  which  it  was  resolved 
unconditionally  to  "  insist  and  demand  that  the  advanced 
or  monopolized  price  of  the  present  month  be  instantly 
taken  off,"  and  a  committee  were  appointed  to  determine 
and  publish,  from  time  to  time,  fixed  prices  for  goods 
and  commodities.  Even  Morris  did  not  escape  visita- 
tion from  a  committee  who  were  appointed  to  execute 
the  law.  A  ship  arrived,  laden  with  goods  consigned  to 
him,  but  which  were  really  for  the  use  of  the  French 
fleet.  Notwithstanding  Morris's  explanation,  "the  peo- 
ple," says  Phillips,  "  chose  to  believe  that  they  were  for 
the  use  of  the  monopolizers  and  forestallers." 1 

In  other  parts  of  the  country  similar  experiments  were 
tried  in  enforcing  the  law.  In  Boston,  on  the  17th  of 
June,  1779,  the  following  handbill  was  seen,  having  been 
posted  during  the  preceding  night : 2  — 

SONS  OF  BOSTON!    SLEEP  NO  LONGER! 

Wednesday,  June  16, 1779. 

You  are  requested  to  meet  on  the  floor  of  the  Old  Scotch 
Meeting  House  to-morrow  morning,  at  9  o'clock,  at  which  time 
the  bells  will  ring. 

Rouse  and  catch  the  Philadelphia  spirit ;  rid  the  community 
of  those  monopolizers  and  extortionators,  who,  like  canker 
worms,  are  gnawing  upon  your  vitals.  They  are  reducing  the 
currency  to  waste  paper,  by  refusing  to  take  it  for  many  arti- 
cles ;  the  infection  is  dangerous.  We  have  borne  with  such 
wretches,  but  will  bear  no  longer.  Public  examples,  at  this 
time  would  be  public  benefits !    You  then  that  have  articles  to 

1  Cont.  Paper  Money,  p.  124.  2  Phillips,  p.  128. 


164        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 


sell,  lower  your  prices ;  3*011  that  have  houses  to  let,  refuse  not 
the  currenc}'  for  rent ;  for  inspired  with  the  spirit  of  those 
heroes  and  patriots,  who  have  struggled  and  bled  for  their 
country,  and  moved  with  the  cries  and  distresses  of  the  widow, 
the  orphan  and  the  necessitous,  Boston  shall  no  longer  be  your 
place  of  security !  Ye  inhabitants  of  Nantucket,  who  first 
introduced  the  accursed  crime  of  refusing  paper  mone}T,  quit  the 
place,  or  destruction  shall  attend  your  property,  and  }T>ur  per- 
sons be  the  object  of  Vengeance. 

N.B.  Lawyers,  keep  yourselves  to  }^ourselves.  It  is  our 
determination  to  support  the  reputable  merchant  and  fair 
trader. 

The  merchants  of  Boston  were  alarmed.  At  a  meeting 
held  the  same  day  the  above  handbill  appeared,  they 
agreed  not  to  advance  prices,  and,  after  the  15th  of  July, 
to  reduce  them.1  They  resolved  to  buy  neither  silver 
nor  gold,  nor  to  make  any  payment  in  these  metals ;  to 
expose  all  persons  who  transgressed  the  regulation,  and 
to  bring  to  justice  all  persons  concerned  in  monopolizing 
and  forestalling.  In  the  town  of  Milton,  near  Boston, 
it  was  resolved  to  take  gold  and  silver  at  the  same  rates 
as  paper  money.2 

In  Albany  the  same  spirit  broke  forth.  A  committee 
were  chosen  to  regulate  prices ;  and  two  transgressors  who 
had  sold  rum  for  more  than  the  established  price  were 
publicly  cried  through  the  city  by  order  of  the  commit- 
tee uas   having  incurred  the  just  indignation  of  the 

1  Penn.  Facket,  June  29,  1779. 

2  For  similar  action  of  the  county  of  Fairfield,  Conn.,  see  Conn. 
Journal,  Aug.  25,  1779.  In  respect  to  taking  gold  and  silver  at  the  same 
valuation  as  paper,  see  hotel  bill  of  Lieut.  Anberry,  Travels  through  the 
Interior  Parts  of  America,  vol.  ii.  p.  487. 


1777.] 


LIMITATION  OF  PRICES. 


165 


people.  The  inhabitants  ordered  them  immediately  to 
appear  before  them,  being  met  at  the  market  place,  where, 
by  falling  on  their  knees  on  a  scaffold  they  acknowledged 
themselves  guilty,  and  promised  to  abide  by  and  assist 
the  orders  of  the  committee,  upon  which  they  were  dis- 
charged." "  The  Pennsylvania  Packet "  of  Philadel- 
phia, which  published  the  foregoing  incident,  adds,  "  hard 
money  is  not  to  pass  here  any  more ;  we  have  lately  hung 
up  and  burned  in  effigy  a  dollar  in  hard  money.1 "  Not- 
withstanding the  punishments  inflicted,  and  indignities 
heaped  upon  individuals,  for  selling  above  legal  prices, 
the  law  was  constantly  evaded.2  The  importer  attempted 
to  justify  himself  because  of  the  great  risk  incurred  in 
getting  his  goods  into  the  country,  and  the  farmer  justi- 
fied himself  in  raising  the  price  of  his  commodities 
because  the  merchant  had  done  the  same  thing,  and  all 
having  any  thing  to  sell  who  violated  the  law  pleaded  a 
similar  excuse.3 

The  object  of  the  measure  was  to  prevent  a  great 
calamity,  the  depreciation  of  the  currency ;  "  but  unfortu- 
nately," as  a  correspondent  declared  in  one  of  the  news- 
papers of  the  day,  "  it  has  a  powerful  tendency  to  bring 
on  us  the  very  misfortune  it  was  designed  to  prevent, 
at  least  it  would  have,  if  strictly  observed."4  Adams5 
writes  as  early  as  September,  1777,  before  the  experiment 
had  been  tried  a  year,  "  That  improvident  Act  for  limit- 
ing prices  has  done  great  injury,  and  in  my  sincere 

1  Penn.  Packet,  June  29,  1779. 

2  Bradford's  Hist,  of  Mass.,  vol.  ii.  p.  135. 

8  Conn.  Courant,  Oct.  21,  1777;  Dec.  2,  1777. 

4  Ibid.,  May  26,  1777.  5  Familiar  Letters,  p.  307. 


166        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1777. 

opinion,  if  not  repealed,  will  ruin  the  state  and  introduce 
a  civil  war.  I  know  not  how  unpopular  this  sentiment 
may  be ;  but  it  is  sincerely  mine."  Nor  will  any  one 
question  the  truth  of  the  assertion  who  has  ever  inves- 
tigated the  subject.  The  regulation  of  prices  by  law  had 
precisely  the  opposite  effect  to  that  intended ;  for  prices 
were  increased  rather  than  diminished  by  the  adoption 
of  the  measure. 

To  what  extent  prices  were  raised  by  the  operation  of 
this  Act  cannot  be  ascertained,  because  it  was  only  one 
of  several  co-operating  causes,  and  it  would  be  impossible 
to  show  the  precise  extent  to  which  each  cause  con- 
tributed in  swelling  prices.  One  newspaper  correspond- 
ent 1  affirmed  that  the  high  prices  prevailing  at  the  time 
he  wrote  were  occasioned  by  three  causes,  —  the  plen- 
tifulness  of  money,  the  cessation  of  trade,  and  the 
•obstruction  of  courts  of  justice,  whereby  debts  were  not 
discharged.  Another  affirmed  that  high  prices  were 
caused,  first  by  a  "want  of  credit  or  means  of  redemp- 
tion in  the  emitters,  second,  a  flood  or  great  number  of 
Ibills  emitted.  The  first  admits  of  no  remedy,  and  must 
assuredly  not  only  depreciate  but  annihilate  a  currency 
so  ill  supported.  The  last  is  no  more  incident  to  a  paper 
than  to  a  gold  or  silver  currency."  Money  had  not 
depreciated,  he  thought,  but  things  were  higher  because 
money  was  so  abundant.2  On  the  other  hand,  Watson 
gave  as  a  reason  for  raising  the  price  of  "  The  Courant," 
that  things  in  general  were  raised  about  fifty  per  cent 
by  the  regulating  Act." 3  One  thing  is  certain,  the  rise 
in  prices  was  not  wholly  covered  by  the  depreciation  in 


i  See  also  Conn.  Courant,  Dec.  30,  1777.   2  Ibid.,  May  12,  1777.   8  Ibid. 


1779.] 


LIMITATION  OF  PRICES. 


167 


paper  money;  for  at  one  time  the  prices  of  articles  in 
hard  money  were  on  an  average  three  times  higher 
than  they  had  formerly  been,  measured  by  the  same 
standard. 

Congress,  seeing  the  futility  of  the  measure,  on  the  8th 
of  October,  1778,  voted  "that  all  limitations  of  prices  of 
gold  and  silver  be  taken  off,"  though  the  measure  was 
carried  by  only  a  bare  majority.  This  was  not  long  after 
the  French  alliance,  when  the  prospect  had  brightened, 
and  many  indulged  the  belief  that  the  war  would  come  to 
a  speedy  close.  The  States,  however,  did  not  heed  this 
latter  recommendation ;  for  they  continued  to  regulate 
prices  nearly  three  years  longer. 

Even  Congress,  more  than  two  years  afterward,  was 
led  to  ask  the  executive  power  of  the  several  States  to 
prepare  and  transmit  to  the  Treasury  Board  a  list  of  the 
commodities  usually  sold  within  each  State  during  the 
year  1774,  with  the  prices  received  therefor,  for  the  pur- 
pose of  guiding  the  commissary-general  and  his  assist- 
ants in  making  purchases.1 

Just  before  Congress  made  this  request,2  a  convention, 
composed  of  delegates  from  the  New-England  States  and 
New  York,  had  assembled  at  Hartford  to  regulate  prices, 
which  recommended  a  general  convention  of  all  the  States 
as  far  south  as  Virginia,  to  meet  for  the  same  purpose  at 
Philadelphia,  in  January  the  following  year.2  This  action 
received  the  warm  approval  of  Congress ; 3  and  the  States 
were  earnestly  recommended  to  enact  laws  for  establish- 
ing and  carrying  into  execution  a  general  limitation  of 
prices  in  their  respective  jurisdictions  on  the  following 

1  Jan.  1,  1780.  2  October,  1779.  8  Nov.  19,  1779. 


168        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 

principles,  and  to  commence  applying  them  from  the 
first  clay  of  February,  1780. 

Articles  of  domestic  produce,  farming,  and  common 
labor,  the  wages  of  tradesmen  and  mechanics,  water  and 
land  carriage,  were  not  to  exceed  twenty-fold  the  prices 
current  through  the  various  seasons  of  the  year  1774. 

Articles  imported  from  foreign  parts  were  to  be  in  due 
proportion  with  labor  and  the  articles  as  above  stated, 
making  a  proper  allowance  for  freight,  insurance,  and 
other  charges.  Salt  and  military  stores,  however, 
whether  of  home  manufacture,  or  imported  from  abroad, 
were  to  be  excepted  from  any  limitation  of  price. 

The  several  States  were  also  recommended  to  enact 
strict  laws  against  engrossing  and  withholding,  and  to 
take  the  necessary  steps  for  securing  the  efficient  execu- 
tion of  the  same  ;  and  officers  and  agents  employed  in 
making  purchases  for  the  United  States  were  directed 
to  conform  strictly  to  the  State  regulations  upon  the 
subject. 

Thus  Congress  failed  to  recognize  the  real  difficulty: 
perhaps  it  was  not  seen ;  anyhow,  it  was  suffered  to  remain.1 

1  The  following  extract  illustrates  Gen.  Marion's  idea  concerning 
the  enforcement  of  the  Act  regulating  prices:  "Every  article  that  is 
brought  in  for  sale,  I  wish  to  have  regulated,  that  it  may  not  be  sold  at 
too  extravagant  prices,  giving  such  a  generous  profit  to  the  importers 
as  to  encourage  the  trade  as  much  as  possible.  Salt  must  not  be  more 
than  four  hard  dollars  per  bushel.  Every  article  that  is  or  may  tend 
to  luxury  may  be  at  whatever  price  the  seller  pleases,  and  my  meaning 
is  to  regulate  nothing  but  what  may  be  absolutely  necessary  for  the 
support  of  life,  such  as  salt,  sugar,  coffee,  tea  and  medicines."  —  Order 
to  Col.  LLorry,  March  7,  1782,  Gibbes's  Doc.  Ilist.  of  Am.  Rev.  in  17S1 
and  1782,  p.  204. 


1779.] 


LIMITATION  OF  PRICES. 


169 


When  paper  money  ceased  to  circulate,  and  prices  were 
measured  in  specie,  they  speedily  fell,  and  no  one  felt 
the  need  of  calling  on  the  States  to  regulate  them.  As 
soon  as  a  sound  money  was  employed,  the  general  dis- 
satisfaction respecting  the  inflation  of  prices  immedi- 
ately ceased.  The  true  remedy  for  high  prices  was 
found  at  last ;  but  in  the  mean  time  a  vast  deal  of  evil 
and  suffering  had  been  experienced. 

In  August,  1779,  which  was  only  a  few  days  before 
the  action  of  Congress  just  described,  the  merchants  of 
Philadelphia  petitioned  the  city  to  repeal  the  Act  limit- 
ing prices,  to  which  petition  a  committee  composed  of 
thirteen  persons  made  an  elaborate  reply.  The  two 
papers  1  contain  an  interesting  summary  of  the  reasons 
both  for  and  against  the  measure,  and  it  is  within  the 
line  of  our  inquiry  to  pass  them  briefly  under  review. 

The  memorialists  claimed  that  the  limitation  of  prices 
in  principle  was  unjust,  because  it  invaded  the  laws  of 
property  by  compelling  a  person  to  accept  less  in  ex- 
change for  his  goods  than  he  could  otherwise  obtain, 
and  therefore  operated  as  a  tax  upon  a  part  of  the  com- 
munity only.  To  this  claim  the  committee  replied,  that 
claiming  a  right  to  an  unlimited  extortion  such  as  pre- 
vailed before  the  limitation  took  effect,  and  ability  to 
enforce  the  claim  because  foreign  necessaries  of  life  were 
in  the  hands  of  a  few,  and  wanted  by  many  who  could 
not  otherwise  procure  them,  nor  conveniently  subsist  with- 
out them,  was  a  principle  far  more  unjust;  and  there- 
fore, admitting  the  position  to  be  true  (which  was  not), 
and  determining  between  two  evils  by  a  comparison  of 

1  Published  in  Penn.  Packet,  Aug.  10,  1779. 


170        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 

causes  and  consequences,  the  committee  were  led  to 
prefer  the  least  evil  as  the  wisest  choice. 

Nor  could  the  committee  subscribe  to  the  doctrine  that 
the  limitation  of  prices  was  in  principle  unjust.  The 
limitation  of  prices  where  extortion  might  otherwise  be 
easily  practised  had  been  the  custom,  not  only  of  our 
own,  but  of  other  countries  in  particular  times  and  cases. 
Limiting  the  interest  of  money  by  law  to  prevent  extor- 
tionous  usury  was  an  application  of  the  same  principle. 
The  limiting  of  town  expenses,  porters'  and  carriers' 
charges,  ferriages,  and  numerous  other  matters,  were 
founded  on  the  probability,  that,  if  no  such  restraints 
were  imposed,  the  persons  practising  those  employments 
would  take  an  unjust  advantage  of  the  immediate  neces- 
sity of  others,  and  compel  them  to  pay  just  what  they 
pleased ;  yet  merchants  had  never  been  known  to  declare 
that  the  principle  thus  applied  to  their  advantage  was 
unjust. 

The  memorialists  not  only  claimed  an  unlimited  right 
of  setting  what  price  they  pleased  on  their  commodities, 
but  admitted,  that,  from  the  present  situation  of  trade, 
they  had  it  in  their  power  to  enforce  those  prices.  The 
right  without  the  power  of  course  would  produce  no  ill 
effect,  as  might  be  seen  in  times  when  trade  was  free, 
open,  and  plentiful ;  but,  as  the  present  situation  of  trade 
had  introduced  a  union  of  the  right  with  the  power, 
therefore  it  was  dangerous,  so  the  committee  declared, 
and  required  that  kind  of  restraint  which  should  remove 
the  danger. 

To  the  claim  that  limitation  of  prices  tended  to  injure 
public  credit,  the  committee  replied,  "  The  defect  cannot 


1779.] 


LIMITATION  OF  PRICES. 


171 


be  in  the  money  itself,  neither  can  it  be  in  the  want  of 
ability  in  the  states  to  redeem  it  when  they  please,  but  in 
the  little  value  which  has  lately  been  set  upon  it  by  those 
who  have  endeavored  to  get  great  sums  into  their  hands 
for  small  quantities  of  goods.  And  we  wish  the  memo- 
rialists to  see,  that  if  the  value  of  the  money  should  be 
still  farther  impaired  by  an  advance  of  prices,  it  seems  to 
us  reasonable  to  apprehend  that  it  will  scarcely  be  worth 
the  redeeming,  and  that  the  easiest,  cheapest,  and  most 
expeditious  method  to  sink  it  will  be  for  every  man  to 
consent  to  lose  that  portion  of  it  which  he  possesses, 
whether  in  bills  or  loan-office  certificates.  For  we  are 
free  to  declare  that  the  late  depreciated  state  of  the 
currency  has  introduced  such  a  practice  of  speculating 
upon  its  future  probable  value  as  is  not  only  disreputable 
to  the  national  character  of  the  country  but  dangerous  to 
her  real  and  public  interest,  and  that  unless  the  value  of 
it  can  be  so  supported  as  to  become  of  equal  and  uni- 
versal advantage  to  the  community,  it  had  better  not  be 
supported  at  all." 

The  committee  further  contended,  that  it  was  impossi- 
ble to  oppose  an  argument  of  words  against  an  argument 
of  facts.  "We  have  had  the  experience  of  four  years 
without  limitations  or  regulations;  the  consequence  of 
which  had  very  nearly  been  the  total  ruin  of  the  cur- 
rency, and  resting  it  here,  we  prefer  this  single  case  to  all 
the  arguments  that  can  be  produced  against  it." 

Another  argument  urged  by  the  merchants  was,  that 
they  had  subscribed  liberally  to  the  public  funds,  which, 
as  previously  explained,  were  the  loan-office  certificates. 
The  reply  of  the  committee  on  this  point  was  not  less 


172        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 

true  than,  perhaps,  unexpected:  "We  are  by  no  means 
satisfied  that  the  public  funds,  on  their  present  footing, 
are  any  benefit  to  the  United  States,  neither  are  we  of 
opinion  that  borrowing  paper  money  on  the  credit  of 
paper  certificates  is  an  eligible  system  of  finance,  and 
that  for  the  following  reasons: 

"  The  country  is  thereby  burthened  with  an  interest  of 
six  per  cent,  without  receiving  a  proportionate  advantage 
therefrom ;  because  an  emission  of  certificates  is  as  much 
an  emission  of  money  as  if  the  same  quantity  had  been 
struck  in  dollars;  therefore  the  six  per  cent  is  paid  for 
nothing,  and  the  same  sum  which  the  certificates  repre- 
sent might  as  well  have  been  struck  in  dollars  without 
interest  as  in  certificates  with  it,  for  on  a  full  considera- 
tion of  the  case  we  have  numerous  reasons  to  believe, 
that  the  sums  which  have  been  borrowed  by  congress  and 
represented  a  second  time  in  certificates,  and  those  certifi- 
cates negotiated  in  payment  add  as  much  to  the  quantity 
of  money  in  circulation  as  if  the  same  sum  had  been 
struck  which  has  been  borrowed.  Neither  do  we  con- 
ceive it  possible  that. the  quantity  of  dollars  which  have 
been  emitted  should  be  a  sufficient  reply  considering  the 
present  annoying  high  prices,  were  not  some  other  species 
of  money  circulating  in  large  payments ;  and  therefore 
the  importer  by  changing  his  dollars  into  certificates  and 
trading  with  those  certificates,  in  the  same  manner  he 
would  with  the  dollars,  receives  the  same  mercantile 
advantages  under  one  shape  as  another,  and  an  interest 
of  six  per  cent  into  the  bargain,  which  we  conceive  to  be 
a  mode  of  funding  and  financing  the  country  will  not 
be  able  to  bear." 


1779.] 


LIMITATION  OF  PRICES. 


173 


Such,  in  brief,  were  the  main  arguments  advanced  by 
friends  and  opponents  to  this  scheme  of  a  legal  regu- 
lation of  prices.  Patriotic  arguments  could  certainly  be 
framed  in  support  of  the  measure ;  other  plausible  ones 
were  not  wanting :  none,  however,  could  live  in  the  sun- 
light of  experience.  Tried  by  facts,  the  measure  was  a 
total  failure  in  achieving  the  end  proposed  by  its  authors, 
and  ultimately  had  not  a  defender.1 

1  Ineffectual  and  unwise  as  the  measures  of  Congress  and  of  the 
States  were  for  regulating  prices,  it  is  worth  while  to  note  the  fact,  that, 
while  the  British  occupied  New  York,  the  prices  of  wheat,  rye,  corn, 
flour,  and  meal,  were  fixed  by  Sir  Henry  Clinton,  on  the  ground  that  it 
was  "  highly  unreasonable  that  those  who  may  stand  in  need  of  those 
articles,  should  be  left  at  the  mercy  of  the  farmer."  The  rates  at  which 
the  farmers  were  selling  their  produce  were  declared  to  be  too  high,  in 
other  words,  "do  vastly  exceed  in  proportion  the  advanced  price  of 
those  articles  which  the  farmer  stands  in  need  of  purchasing;"  and 
still  further,  the  farmers  were  directed  to  thresh  their  grain  within 
certain  times  stated  in  the  proclamation.  If  the  order  were  disobeyed, 
his  whole  crop  of  grain  or  quantity  of  manufactured  flour  or  meal  was 
to  be  seized  and  confiscated.  Proclamation  issued  Dec.  20,  1777,  Al- 
mon's  Rememb.,  1778,  p.  57.  Also,  when  Sir  William  Howe  was  in 
possession  of  Philadelphia,  the  prices  of  porters  and  draymen  were 
fixed  by  proclamation  on  account  of  "  the  exorbitant  prices  they  de- 
mand for  their  services."    Proc.  dated  May  13,  1778,  Ibid.,  p.  210. 


174        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 


CHAPTER  XIII. 

THE  LEGAL  TENDER  LAWS  OF  THE  REVOLUTION". 

Among  other  expedients  to  preserve  the  value  of  Con- 
tinental paper  money  was  the  enactment  of  laws  by 
Congress  and  the  States,  making  bills  of  credit  a  legal 
tender  in  discharge  of  all  pecuniary  obligations.  As 
paper  money  had  formerly  been  a  legal  tender  in  Penn- 
sylvania, this  measure  was  not  an  original  one  with  the 
Continental  Congress.  Rhode  Island  was  the  first  State 
to  heed  the  recommendation  of  Congress ;  and  in  August, 
1775,  the  Assembly  declared  the  Continental  bills  to  be 
a  legal  tender  in  payment  of  all  debts,  and  threw  over 
them  the  same  protection  from  the  arts  of  the  counter- 
feiter as  had  been  devised  for  the  preservation  of  the 
State  issues.1  The  Assembly  also  resolved  that  any  per- 
son who  refused  such  money  ought  to  be  considered  an 
enemy  to  the  credit,  reputation,  and  happiness  of  the 
Colonies,  and  wholly  destitute  of  the  regard  and  obli- 
gation which  he  owed  to  his  country ;  that  he  should  be 
regarded  as  wanting  in  zeal  to  the  cause  of  liberty,  and 
be  debarred  from  communication  with  all  good  citizens. 
Virginia  followed  next  in  enacting  laws  of  a  similar 
import :  these  examples  were  shortly  afterwards  imitated 

\ 

1  Staples,  Hist,  of  R.  I.  in  the  Cont.  Cong.,  p.  49. 


1775-80.]  LEGAL  TENDER  LAWS  OF  THE  REVOLUTION.  175 

by  New  Hampshire  and  New  Jersey,  and  ere  long  all  the 
States  had  taken  action  theron. 

The  laws  of  the  States  were  not  in  every  respect  simi- 
lar ;  for  in  some  of  them  the  bills  were  made  a  legal 
tender  only  for  the  interest  of  former  debts,  but  not  for 
the  principal.  In  New  Hampshire,  on  the  other  hand,  if 
a  creditor  refused  to  receive  the  bills  when  offered,  the 
whole  debt  was  legally  cancelled.  Congress,  desiring 
uniformity  of  action  on  the  part  of  the  States,  passed 
the  following  resolution  in  January,1  1777:  "Resolved, 
That  all  bills  of  credit,  emitted  by  authority  of  Congress, 
ought  to  pass  current  in  all  payments,  trade,  and  dealings, 
in  these  states,  and  be  deemed  in  value  equal  to  the  same 
nominal  sums  in  Spanish  milled  dollars ;  and  that  whoever 
shall  offer,  ask,  or  receive  more  in  the  said  bills  for  any 
gold  or  silver  coins,  bullion,  or  any  other  species  of  money 
whatsoever,  than  the  nominal  sum  or  amount  thereof  in 
Spanish  milled  dollars,  or  more,  in  the  said  bills,  for  any 
lands,  houses,  goods,  or  commodities  whatsoever,  than 
the  same  could  be  purchased  at  of  the  same  person  or 
persons  in  gold,  silver,  or  any  other  species  of  money 
whatsoever ;  or  shall  offer  to  sell  any  goods  or  commodi- 
ties for  gold  or  silver  coins,  or  any  other  species  of  money 
whatsoever,  and  refuse  to  sell  the  same  for  the  said  con- 
tinental bills;  every  such  a  person  ought  to  be  deemed 
an  enemy  to  the  liberties  of  these  United  States,  and  to 
forfeit  the  value  of  the  money  so  exchanged,  or  house, 
land,  or  commodity  so  sold  or  offered  to  sale.  And  it  is 
recommended  to  the  legislatures  of  the  respective  states, 
to  enact  laws  inflicting  such  forfeitures  and  other  penal- 


1  Jan.  14. 


176 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 


ties  on  offenders  as  aforesaid,  as  will  prevent  such  per- 
nicious practices."  Congress  further  recommended  the 
Legislatures  of  the  States  to  pass  laws  making  the  bills 
of  credit  issued  by  Congress  a  lawful  tender  in  payment 
of  public  and  private  debts,  and  a  refusal  thereof  an 
extinguishment  of  the  same. 

Thus,  by  action  of  the  States  and  Congress,  paper 
money  was  endowed  with  a  legal  tender  attribute.  The 
disastrous  consequences  of  this  legislation  will  now  be 
related. 

A  historian  who  lived  in  those  times  has  given  a  vivid 
description  of  the  miseries  which  flowed  from  this  truly 
iniquitous  measure.  "The  aged  who  had  retired  from 
the  scenes  of  active  business,  to  enjoy  the  fruits  of  their 
industry,  found  their  substance  melting  away  to  a  mere 
pittance,  insufficient  for  their  support.  The  widow  who 
lived  comfortably  on  the  bequests  of  a  deceased  husband, 
experienced  a  frustration  of  all  his  well-meant  tenderness. 
The  laws  of  the  country  interposed,  and  compelled  her 
to  receive  a  shilling,  where  a  pound  was  her  due.  The 
blooming  virgin  who  had  grown  up  with  an  unquestiona- 
ble title  to  a  liberal  patrimony,  was  legally  stripped  of 
every  thing  but  her  personal  charms  and  virtues.  The 
hapless  orphan,  instead  of  receiving  from  the  hands  of 
an  executor,  a  competency  to  set  out  in  business,  was 
obliged  to  give  a  final  discharge  on  the  payment  of  6d. 
in  the  pound.  In  many  instances,  the  earnings  of  a  long 
life  of  care  and  diligence  were,  in  the  space  of  a  few 
years,  reduced  to  a  trifling  sum.  A  few  persons  escaped 
these  affecting  calamities,  by  secretly  transferring  their 
bonds,  or  by  flying  from  the  presence  or  neighborhood 
of  their  debtors.'' 


1775-30.]   LEGAL  TENDER  LAWS  OF  THE  REVOLUTION.  177 


The  debtor,  however,  leaving  out  the  wrecking  of  his 
conscience,  was  the  gainer.  "A  hog  or  two  would  pay 
for  a  slave ;  a  few  cattle  for  a  comfortable  house ;  and  a 
good  horse  for  an  improved  plantation.  A  small  part  of 
the  productions  of  a  farm  would  discharge  the  long  out- 
standing accounts,  due  from  its  owner.  The  dreams  of 
the  golden  age  were  realized  to  the  poor  man  and  the 
debtor,  but  unfortunately  what  these  gained,  was  just  so 
much  taken  from  others." 

The  candor  of  history  requires  the  fact  to  be  stated 
that  paper  money  was  "at  all  times  the  poor  man's 
friend.  While  it  was  current,  all  kinds  of  labor  very 
readily  found  their  reward.  In  the  first  years  of  the 
war,  none  were  idle  from  want  of  employment,  and  none 
were  employed,  without  having  it  in  their  power  to 
obtain  ready  payment  for  their  services.  To  that  class 
of  people,  whose  daily  labor  was  their  support,  the  depre- 
ciation was  no  disadvantage.  Expending  their  money  as 
fast  as  they  received  it,  they  always  got  its  full  value. 
The  reverse  was  the  case  with  the  rich,  or  those  who 
were  disposed  to  hoarding.  No  agrarian  law  ever  had  a 
more  extensive  operation,  than  continental  money.  That 
for  which  the  Gracchi  lost  their  lives  in  Rome  was  peace- 
ably effected  in  the  United  States,  by  the  legal  tender  of 
these  depreciating  bills. 

"  That  the  helpless  part  of  the  community  were  legisla- 
tively deprived  of  their  property,  was  among  the  lesser 
evils,  which  resulted  from  the  legal  tender  of  the  depre- 
ciated bills  of  credit.  The  iniquity  of  the  laws  estranged 
the  minds  of  many  of  the  citizens  from  the  habits  and 
love  of  justice.    The  nature  of  obligations  was  so  far 


178        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 

changed,  that  he  was  reckoned  the  honest  man,  who  from 
principle  delayed  to  pay  his  debts.  The  mounds  which 
government  had  erected,  to  secure  the  observance  of 
honesty  in  the  commercial  intercourse  of  man  with  man, 
were  broken  down.  Truth,  honor,  and  justice  were  swept 
away  by  the  overflowing  deluge  of  legal  iniquity,  nor 
have  they  yet  assumed  their  ancient  and  accustomed 
seats."    So  wrote  Ramsay  in  1789.1 

The  newspapers  of  the  period  were  filled  with  bitter 
complaints  of  the  injustice  of  the  measure  and  of  the 
losses  to  which  persons  were  subjected  in  consequence  of 
it.  A  woman  addresses  a  letter  to  Mr.  Dunlap,  the 
printer  of  "  The  Pennsylvania  Packet," 2  in  which  she 
says,  "  If  something  is  not  done  to  prevent  trustees  and 
guardians  from  taking  advantage  of  the  times,  in  defraud* 
ing  helpless  widows  and  orphans,  great  numbers  who 
have  lived  in  opulence  before  the  death  of  their  husbands 
or  parents,  and  had  what  was  thought  a  competency  left 
them  after  their  death,  will  be  reduced  to  a  state  of 
indigence."  She  then  tells  the  story  of  her  own  mis- 
fortunes. Her  father  had  died  six  years  previously,  leav- 
ing her  "  a  pretty  fortune  in  ready  cash,  which  he  placed 
in  the  hands  of  a  neighbor,  whom  he  trusted  would  ad- 
minister strict  justice  towards "  her.  When  she  became 
of  age,  he  insisted  on  paying  her  in  the  depreciated 
money  of  the  day,  although  the  real  estate  purchased 
with  the  money  he  received  was  worth  "  ten  times  the 
price  it  cost.  Thus  you  see,"  she  adds,  "what  advantages 
our  laws  give  to  bad  men,  who  aggrandize  themselves  at 
the  expense  of  the  helpless  orphan." 

1  Hist,  of  Am.  Rev.,  vol.  ii.  p.  134  et  seq.       2  April,  1779. 


17  7. --80.]  LEGAL  TENDER  LAWS  OF  THE  REVOLUTION.  179 


A  writer  of  the  day,  whose  genuine  patriotism  had  not 
weakened  his  power  of  discernment,  says,  "  The  Ameri- 
cans deserve  the  highest  praise  for  the  fortitude  with 
which  they  have  borne  the  sacking  of  their  towns,  and 
the  desolation  of  their  country,  from  the  hands  of  the 
British  army.  But  let  Europe  and  posterity  admire  them 
chiefly  for  the  patience  with  which  they  have  borne  the 
more  complicated  evils  and  losses  of  tender-laws,  regu- 
lations of  trade  and  exchange,  and  a  depreciating  paper 
currency."  He  maintained  that  the  law  making  Conti- 
nental money  a  legal  tender  for  old  debts  was  one  of 
the  causes  which  depreciated  its  value ;  for  the  law 
"  made  it  the  interest  of  every  man  who  had  debts,  or 
even  taxes,  to  pay,  to  depreciate  the  money.  It  moreover 
excited  the  disgust  and  opposition  of  everybody  who  had 
been  injured  by  it."  He  added  the  following  pregnant 
remarks,  whose  virtue  is  not  yet  exhausted :  "  It  becomes 
rulers  to  learn  from  the  catastrophe  of  our  Continental 
currency,  that  money  is  upon  a  footing  with  commerce 
and  religion.  They  all  three  refuse  to  be  the  subjects  of 
law.  It  becomes  the  rulers  of  freemen  to  learn  further, 
that  money  is  property,  and  that  the  least  attempt  to 
lessen  its  value  in  our  pockets  or  chests  is  taxing  us 
without  our  consent.  It  is  the  highest  act  of  tyranny. 
We  have  tried  every  art  and  device  to  keep  up  the  credit 
of  paper  money,  except  one  —  we  have  never  yet  tried 
the  effects  of  being  honest."  1 

A  writer  in  "  The  Connecticut  Journal " 2  affirmed,  that 

1  Moore's  Diary  of  Am.  Rev.,  vol.  ii.  p.  422. 

2  Conn.  Jour.,  Nov.  11,  1778;  see  Continental  Journal,  Jan.  7,  1779; 
also  Ibid.,  Feb.  25  and  April  15,  1779. 


180        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 

in  consequence  of  the  resolutions  of  Congress  and  of  the 
States,  making  the  currency  a  tender  in  law,  nine-tenths 
perhaps,  at  least,  of  the  debts  outstanding  in  1775,  had 
been  paid  in  Continental  bills.  People  took  advantage  of 
the  times,  and  almost  universally  settled  accounts  with 
creditors  who  would  accept  these  bills  in  payment.  All 
such  debts  were  once  as  good  as  gold  and  silver.  A  very 
considerable  part  of  them  were  originally  in  hard  money 
lent  out  on  interest.  Great  sums  were  debts  of  mer- 
chants, contracted  when  goods  sold  at  the  lowest  rates, 
some  of  which,  probably,  had  been  on  book  for  years, 
without  interest.  Other  debts  were  fortunes,  or  lesser 
inheritances,  originally  paid  in  hard  money,  or  in  obliga- 
tions for  it ;  or  they  were  funds  for  the  support  of  public 
schools  and  seminaries  of  learning.  The  losses  accruing 
to  nearly  all  creditors  of  this  description  were  irreparable. 

It  is  easy  enough  to  see  how  the  debtors  were  bene- 
fited ;  but  how  could  creditors  be  by  the  operation  of  a 
law,  as  one  of  them  pithily  put  it,  which  declared 
"denominations  and  sounds  to  be  equivalent  for  real 
substance  "  ? 

Had  the  legal  tender  regulations  been  framed  with 
reference  to  future  contracts,  while  deploring  the  measure 
as  unwise,  no  one  could  have  complained  of  their  operat- 
ing unjustly.  But,  in  endowing  such  legislation  with  a 
retroactive  operation,  the  grossest  injustice  was  perpe- 
trated. The  fraudulent  debtor  took  advantage  of  the 
law  to  cheat  his  creditor ;  while  the  latter  could  not  save 
himself,  except  by  privately  transferring  the  written  obli- 
gation, or  by  refusing  payment,  which,  indeed,  was  done 
at  a  risk  of  losing  the  debt.    Nevertheless,  creditors  did 


1775-80.]  LEGAL  TENDER  LAWS  OF  THE  REVOLUTION.  181 


occasionally  refuse  to  accept  payment,  believing,  that,  at 
some  future  time,  justice  would  triumph,  and  the  iniqui- 
tous law  be  repealed.  Husbandmen  who  lived  remote 
from  the  scene  of  hostilities  were  able  to  preserve  their 
property.  Hawkers  and  monopolizers,  "who  crept  from 
obscurity  and  assumed  the  name  of  merchants,"  waxed 
strong  and  rich  during  these  distressing  times.  But 
those  whose  property  was  held  in  trust,  or  whose  living 
depended  on  fixed  salaries,  or  who  could  not  descend  to 
practise  knavery,  though  established  by  law,  experienced 
severe  suffering. 

These  laws,  notwithstanding  their  well-known  opera- 
tion, remained  in  force  until  1780,  when  Congress  urged 
the  States  to  amend  them  in  "such  a  manner  as  shall 
be  judged  most  conducive  to  justice  in  the  present  state 
of  the  paper  money." 1  Then  arose  a  new  set  of  diffi- 
culties to  confront  debtors  whose  obligations  had  been 
incurred  while  paper  money  was  passing  swiftly  through 
the  era  of  depreciation.  The  several  States  acted  upon 
the  recommendation  of  Congress,  and  repealed  the  legal 
tender  laws;  but  in  most  cases  the  situation  of  both 
the  debtor  and  creditor  classes  was  viewed  in  the  clear 
light  of  justice,  and  such  laws  were  enacted  as  displayed 
a  fine  perception  of  the  rights  and  equities  of  all  parties.2 
Rhode  Island  was  among  the  first  States  to  act,  and 
her  legislation  is  worthy  of  extended  consideration.3 

1  March  20. 

2  The  English  commissioners,  who  had  previously  acted  in  South 
Carolina,  recommended  as  just  and  equitable  the  payment  of  debts 
according  to  a  scale  of  depreciation  established  by  them,  Almon's 
Rememb.,  1781,  part  1,  pp.  216,  217. 

8  R.  I.  Col.  Records,  vol.  ix.  pp.  281-284. 


182        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 


All  contracts  made  previously  to  the  1st  of  January, 
1777,  for  bills  of  credit,  either  of  that  State  or  of  Con- 
gress, were  deemed  equal  to  the  same  nominal  sum  in 
gold  or  silver,  while  all  contracts  made  after  that  date, 
and  previous  to  the  Act  we  are  now  describing,  which 
was  passed  in  November,  1780,  expressed  or  understood 
to  be  liquidated  in  paper  money,  were  to  be  rated  in 
Spanish  milled  dollars,  or  other  money  equivalent  thereto, 
by  a  table  of  depreciation  contained  in  the  Act  itself, 
extending  over  the  years  1777-79,  and  the  first  four 
months  of  1780,  in  which  the  depreciation  varied  from 
105  in  January,  1777,  to  4000  in  April,  1780. 

It  was  also  enacted  that  all  private  contracts  made 
before  the  1st  of  May,  1777,  "and  all  special  contracts 
made  for  silver  or  gold  after  that  time,  between  individ- 
uals, shall  be  paid  in  gold  or  silver  only,"  and  that  all 
other  private  contracts  made  after  that  date  might  be 
discharged  by  paying  "the  just  value  of  the  currency 
•contracted  for  in  silver  or  gold,  or  in  bills  of  credit  of 
the  United  States,  at  the  current  exchange  at  the  time 
;of  payment." 

Provision  was  next  made  for  executors,  administrators, 
guardians,  agents,  clerks  of  courts,  and  other  persons 
having  trust  funds  in  their  possession.  They  were  to 
be  discharged  from  any  demands  of  those  for  whom  they 
had  so  acted,  without  the  allowance  of  any  depreciation 
thereon.  If,  however,  they  had  used  the  funds  thus 
confided  to  them  on  their  "  own  private  account,"  they 
were  required  to  "account  therefor  upon  the  principles 
of  justice  and  equity,  in  the  same  manner  as  other 
persons." 


1775-80.]  LEGAL  TENDER  LAWS  OF  THE  REVOLUTION.  183 

While  paper  money  was  depreciating,  as  we  have  pre- 
viously shown,  a  class  of  persons  refused  to  receive  it 
in  payment  of  obligations  due  to  them.1  The  Legislature 
provided,  that  in  such  cases,  if  the  creditor  brought  an 
action  to  recover  his  debt,  the  Court  should  refer  the 
matter  to  indifferent  persons  to  determine  the  same  in 
the  way  appearing  to  them  "just  and  equitable,  taking 
into  account  all  the  circumstances  thereof." 

"As  the  widow,  the  infant  and  the  orphan,  at  all 
times,  ought,  in  a  special  manner,  to  receive  the  support 
of  the  laws,  in  the  protection  of  their  persons  and 
property,"  it  was  enacted  that  the  refusal  of  any  execu- 
tor, administrator,  guardian,  or  agent,  to  receive  paper 
money  due  to  them  in  their  capacities  as  trustees,  should 
not  operate  to  the  prejudice  of  those  for  whom  they 
were  acting,  but  they  should  "be  allowed  the  whole 
depreciation  in  such  debt  notwithstanding." 

In  respect  to  partial  payments  of  notes  and  other 
obligations,  the  Act  further  provided,  that  the  sums  thus 
paid  should  be  allowed,  without  any  deduction  on  account 
of  the  depreciation  of  paper  money;  while  adequate 
provision  was  also  made  for  the  just  settlement  of  all 
accounts,  including  book  debts,  thus  covering  all  claims 
of  debtors  and  creditors  who  were  likely  to  be  affected 
in  any  way  by  the  repeal  of  the  legal  tender  laws. 

No  one  in  that  State,  or  any  other,  seems  to  have 
questioned  the  propriety,  either  of  repealing  the  legal 
tender  laws,  or  of  adjusting  the  liability  under  contracts 
and  obligations  incurred  during  the  three  years  and 
more  during  which  paper  money  was  depreciating  prior 

i  Ante,  p.  180. 


184        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 

to  the  repeal  of  the  legal  tender  laws  by  the  standard 
of  justice. 

The  example  of  Rhode  Island  was  imitated  by  all  the 
States,  with  more  or  less  variation.  Its  essential  feature, 
however,  is  found  in  the  legislation  of  all  the  other  States ; 
namely,  of  adjusting  contracts  made  while  the  legal  tender 
law  was  in  operation,  in  such  a  way  as  to  render  to 
the  creditor  a  fair  equivalent  for  what,  in  the  beginning, 
was  received  by  the  debtor.  Besides,  creditors  were 
generally  prevented  from  bringing  actions  for  a  year  or 
two,  or  even  a  longer  period,  to  recover  their  debts,  and, 
in  cases  where  judgments  had  been  rendered,  the  courts 
were  directed  to  suspend  issuing  executions.  The  pur- 
pose of  these  stay  laws  was  to  give  the  Legislatures  time 
to  enact  measures  for  determining  the  rights  of  all 
parties,  which  were  devised,  in  most  cases,  within  a  year 
from  the  time  Congress  recommended  a  repeal  of  the 
tender  laws. 

Virginia  did  not  take  action  upon  repealing  the  legal 
tender  law  till  June,  1781 ;  and  even  then  the  legal 
tender  function  of  paper  money  was  preserved  for  a  year 
longer,  and  without  any  abridgment  whatever  in  paying 
it  for  taxes.  The  law  provided  that  all  debts  and  con- 
tracts made  in  the  current  money  of  the  State  for  the 
six  years  inclusive,  between  the  1st  of  January,  1777 
and  1782,  or  of  the  United  States,  "excepting  at  all 
times  contracts  entered  into  for  gold  and  silver  coin, 
tobacco,  or  any  other  specific  property,"  remaining  due 
and  unfulfilled,  should  be  liquidated  in  accordance  with 
a  scale  of  depreciation  established  by  the  Legislature; 
"  that  is  to  say,  by  reducing  the  amount  of  all  such  debts 


1775-80.]  LEGAL  TENDER  LAWS  OF  THE  REVOLUTION.  185 

and  contracts  to  the  true  value  in  specie  at  the  clays 
or  times  the  same  were  incurred  or  entered  into ;  and, 
upon  payment  of  said  value  so  found  in  specie  or  other 
money  equivalent  thereto,  the  debtors  or  contractors 
shall  be  forever  discharged  of  and  from  the  said  debts 
or  contracts,  any  law,  custom,  or  usage  to  the  contrary 
in  any  wise  notwithstanding."  In  all  cases  of  part  pay- 
ment of  any  debt,  the  debtor  was  allowed  full  credit  for 
the  nominal  amount. 

The  action  of  Maryland  is  worthy  of  note  from  its 
striking  difference  to  the  other  modes  related.  The  old 
Continental  issues  were  declared  to  be  no  longer  a  legal 
tender,  except  at  the  exchange  of  £166  13s.  4cZ.  current 
money  for  £100  sterling;  but  the  new  emissions  were 
to  be  "  current  and  a  legal  tender  in  payment  discharge  " 
of  any  obligation  incurred  thereafter:  if,  however,  they 
did  depreciate,  the  chancellor  and  judges  of  the  General 
Court  were  to  ascertain  the  amount  of  their  depreciation, 
and  the  liquidation  of  debts  was  to  be  governed  by  the 
rule  thus  established. 

Pennsylvania,  alarmed  at  the  novel  situation,  passed 
an  Act  forbidding  all  persons  to  bring  suits  to  recover 
debts  for  two  years,  because  of  the  scarcity  of  specie.1 
The  first  attempt  in  March,  1780,  to  suspend  the  opera- 
tion of  the  legal  tender  laws,  so  far  as  they  related  to  the 
Continental  currency,  failed ;  but  two  months  later  a 
bill  was  passed  depriving  these  paper  issues  of  their  legal 
tender  quality.  In  June  the  same  year,  the  Assembly 
declared,  "  that  from  time  to  time  all  contracts  should  be 
made  good  according  to  the  special  nature  of  each." 

1  Penn.  Packet,  Dec.  3,  1782. 


186 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 


The  question  had  not  reached  a  final  solution.  The 
State  issued  more  paper  money,  which  at  first  every  one 
was  free  to  take  at  his  own  valuation;  not  long  after- 
ward, however,'  by  a  special  Act,  this  new  issue  was 
declared  to  possess  a  legal  tender  function.  Legislation 
on  the  subject  grew  bitter ;  but  finally,  in  June,  1781,  all 
the  legal  tender  laws  were  repealed.1 

We  have  not  space  to  trace  minutely  the  action  of 
every  State  repealing  its  legal  tender  laws  in  accord- 
ance with  the  recommendation  of  Congress.  As  soon  as 
the  voice  of  Congress  was  heard  in  South  Carolina,  Gov. 
Rutledge  issued  a  proclamation  forbidding  creditors  to 
sue  for  the  recovery  of  their  debts  until  the  meeting 
of  the  Legislature.2  In  his  message  addressed  to  that 
body  he  remarked,  with  reference  to  this  subject,  "  You 
will  now  consider  whether  it  may  be  proper  to  repeal 
those  laws,  and  fix  some  equitable  mode  for  the  discharge 
of  debts  contracted  whilst  paper  money  was  in  circu- 
lation." This  view  prevailed  throughout  the  States,  and 
in  a  more  or  less  perfect  form  was  embodied  in  their 
legislation.3 

A  somewhat  singular  effect  of  the  repeal  of  the  legal 
tender  laws  was  experienced  in  collecting  fines  imposed 
under  enactments  passed  at  various  times  prior  to  the 
repeal  of  the  legal  tender  measures.4  As  the  specie 
standard  was  now  restored,  it  was  necessary  to  collect 

1  The  opinion  of  President  Reed  was,  that  "all  contracts  should  be 
made  good  according  to  the  special  nature  of  each"  (Reed's  Life  of 
Beed,  vol.  ii.  p.  280).  See  Ibid,  for  action  of  Pennsylvania  on  the  sub- 
ject, pp.  288-292,  296-299. 

2  Gibbes's  Doc.  Hist,  of  Am.  Rev.,  1781  and  1782,  p.  1G5. 
8  Ibid.,  p.  2:j^.  4  Ibid.,  p.  104. 


1775-80.]  LEGAL  TENDER  LAWS  OF  THE  REVOLUTION.  187 


fines  in  specie ;  but  it  was  manifestly  unjust  to  collect  a 
fine  in  specie  for  the  written  amount,  when  the  legis- 
lators, at  the  time  of  prescribing  the  fine,  supposed  the 
collection  of  it  would  be  made  in  paper,  at  an  enormous 
depreciation  compared  with  gold  and  silver.  Gov.  Rut- 
ledge  wrestled  with  this  vexatious  question  in  a  proclama- 
tion ;  and,  doubtless,  the  judiciaries  of  other  States  were 
perplexed  with  the  same  question.  Of  course,  it  was 
easy  enough  to  amend  the  statutes  with  reference  to 
future  fines ;  but  it  was  very  difficult  to  deal  with  those 
cases  which  had  occurred  before  legislation  could  render 
any  relief. 

Congress,  like  the  States,  established  a  scale  of  depre- 
ciation of  paper  money,  by  which  all  contracts  made 
by  officials  of  the  General  Government  during  the  time 
legal  tender  laws  were  in  operation  were  to  be  settled. 
It  was  also  necessary  to  pass  numerous  special  acts  upon 
the  subject  which  it  was  quite  impossible  to  cover  by  any 
general  regulation. 

Such  were  some  of  the  chief  consequences  flowing 
from  the  enactment  as  well  as  the  repeal  of  the  legal 
tender  laws.  Their  enactment  proved  a  benefit  to  the 
debtor  and  the  working-classes ;  creditors  of  every  de- 
scription were  injured  or  ruined ;  and  the  foundations  of 
morality  were  sadly  undermined.1     In  repealing  these 

1  "  The  whole  history  of  this  continental  paper  is  a  history  of  public 
frauds.  Old  specie  debts  were  often  paid  in  a  depreciated  currency,  and 
even  new  contracts  for  a  few  weeks  or  days  were  often  discharged  with 
a  small  part  of  the  value  received.  From  this  plenty  and  fluctuating 
state  of  the  medium,  sprung  hosts  of  speculators  and  itinerant  traders, 
who  left  their  honest  occupations  for  the  prospect  of  immense  gains,  in 
a  fraudulent  business,  that  depended  on  no  fixed  principles,  and  the 


188        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 


regulations,  the  States  sought  to  do  justice  to  all  who 
had  incurred  obligations  while  the  currency  was  depre- 
ciated, and  labored  honestly  and  effectually  to  that  end. 
In  making  paper  money  a  legal  tender,  neither  Congress 
nor  the  States  designed  to  perpetrate  the  ill  effects  which 
followed.  Until  the  year  1780,  it  was  believed  by  Con- 
gress and  the  people  generally,  that  the  whole  paper  flood 
would  improve  in  quality  until  it  was  worth  as  much  in 
specie  as  it  purported  to  be.  The  legal  tender  laws  were 
established,  said  "  The  Freeman's  Journal "  in  1782,  in 
reviewing  their  history  in  Pennsylvania,  "with  the  ap- 
probation of  every  one  who  wished  to  be  considered  as 
devoted  to  independence  and  liberty,  and  whatever  may 
be  said  against  the  enforced  tender  of  this  sort  of  money, 
yet  to  these  tender  laws,  under  God,  must  the  political 
salvation  of  the  country  in  the  years  1776,  1777  and  1778 
be  ascribed."  1 

When  the  present  Constitution  was  framed,  its  authors, 
fresh  with  the  recollection  of  the  terrible  losses  and 
iniquities  which  had  sprung  from  the  legal  tender  laws, 
endeavored  to  guard  as  strongly  as  possible  against  the 
perpetration  of  so  grave  an  injustice  in  the  future ;  yet, 
within  a  hundred  years,  the  barriers  set  up  in  the  Con- 
profits  of  which  could  be  reduced  to  no  certain  calculation." — Noah 
Webster,  Coll.  of  Essays,  p.  192. 

1  Thomas  Paine  wrote  with  reference  to  paper  money,  "Every  stone 
in  the  bridge,  that  has  carried  us  over,  seems  to  have  a  claim  upon  our 
esteem.  But  this  was  a  corner-stone  and  its  usefulness  cannot  be  for- 
gotten. There  is  something  in  a  grateful  mind,  which  extends  itself 
even  to  things  that  can  neither  be  benefited  by  regard,  nor  suffer  by 
neglect;  —  but  so  it  is,  and  almost  every  man  is  sensible  of  the  effect." 
—  Latter  addressed  to  the  Abbe  Iiaynal,  p.  2G. 


1775-80.]  LEGAL  TENDER  LAWS  OF  THE  REVOLUTION.  189 

stitution  were  broken  down,  and  the  deed  was  sanctioned 
not  from  a  necessity  greater  than  the  preservation  of  the 
Constitution  itself,  —  a  defence  which  many  would  have 
regarded  as  justifiable,  —  but  on  the  ground,  forsooth 
that  there  had  been  no  violation  of  the  organic  law. 
If,  however,  this  is  read  in  the  light  of  history,  especially 
of  the  debate  in  the  convention  which  made  and  adopted 
it,  nothing  can  be  clearer  than  that  the  framers  of  that 
marvellous  instrument  said  and  meant  just  the  opposite 
to  that  which  the  Supreme  Court  of  the  United  States 
amrni  they  said  and  intended. 


190        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  11775-80. 


CHAPTER  XIV. 

TAXATION. 

In  several  ways,  as  we  have  seen,  did  Congress  seek 
to  obtain  funds  for  maintaining  the  government,  and 
carrying  on  the  war.  /There  was  another  mode,  however, 
that  of  taxation,  which  ought  to  have  proved  the  most 
efficacious  of  all,  but  which,  for  various  reasons,  yielded 
only  slight  relief./ 

When  the  first  issues  of  paper  money  appeared,  no  one 
supposed  the  quantity  would  be  very  great ;  and  for 
several  months  their  value  was  maintained  at  par  with 
gold  and  silver.1  "The  United  States,"  says  Ramsay, 
"for  a  considerable  time  derived  as  much  benefit  from 
this  paper  creation  of  their  own,  though  without  any 
established  funds  for  its  support  or  redemption,  as  would 
have  resulted  to  them  from  the  free  gift  of  so  many 
Mexican  dollars."  Probably  no  one  was  so  sanguine  as 
to  believe  that  any  large  quantity  could  be  maintained  at 
par  with  the  precious  metals ;  and  accordingly,  Congress, 
as  soon  as  the  first  two  issues  were  authorized,  consisting 

1  It  is  true  that  some  persons  in  Philadelphia,  as  early  as  November, 
1775,  refused  to  receive  Continental  bills,  or  even  those  of  Pennsylvania 
(STAPLES'S  Hist,  of  B.  I.  in  the  Cont.  Concj.y  p.  50);  but,  doubtless, 
they  were  either  Tories,  Quakers,  or  individuals  wearing  some  other 
religious  cloak. 


1775-80.] 


TAXATION. 


191 


of  three  million  dollars,  prepared  an  assessment  based 
upon  the  supposed  population  of  the  Colonies,  and  appor- 
tioned this  sum  among  them,  expecting  they  would  raise 
the  quotas  assigned  to  them  by  taxation.  Congress  did 
not  possess  the  power  to  tax  the  States  directly ;  and,  even 
had  such  an  authority  been  granted,  the  exercise  of  it  in 
the  beginning  of  the  war  would  doubtless  have  proved 
an  unpopular  proceeding.1  Congress  prudently  left  this 
matter  to  the  States,  believing  they  would  promptly  de- 
vise measures  for  raising  their  quotas.  But  they  hesitated 
to  act,  perhaps  fearing  evil  consequences  if  a  tax  were 
thus  early  imposed  upon  the  people. 

There  was  one  person  at  least,  who,  at  the  very  outset 
of  issuing  paper  money,  saw  the  necessity  of  taxing  the 
people  for  the  purpose  of  paying  it.  This  was  Webster. 
Writing  to  "  The  Pennsylvania  Evening  Post," 2  in  Octo- 
ber, 1776,  he  remarks,  "  Payment  in  promises  or  bills  of 
credit  is  a  temporary  expedient,  and  will  always  be  dan- 
gerous, where  the  quantity  increases  too  much,  at  least 
it  will  always  have  the  consequences  of  a  medium  in- 
creased beyond  the  necessities  of  trade ,  and  whenever 
that  happens,  a  speedy  remedy  is  necessary,  or  the  ill 
effects  will  soon  be  alarming,  and,  if  long  neglected,  will 
not  be  easily  remedied.  The  remedy  or  rather  prevention 
of  this  evil  I  take  to  be  very  easy  at  present." 

Having  shown  the  effects  of  issuing  a  greater  quantity 
of  paper  money  than  required  by  trade,  he  points  out 
the  remedy,  which  consisted  in  "lessening  the  quantity 
of  circulating  medium."    This  could  be  done  in  three 

1  Franklin,  Letter  to  Morris,  Dec.  25,  1783,  Dip.  Cor.,  vol.  iv.  p.  187. 

2  Political  Essays,  p.  2. 


192 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 


ways ;  the  last  of  which  was  by  a  tax,  which,  he  affirmed, 
"  never  can  be  paid  so  easy  as  when  money  is  more  plenty 
than  goods,  and  of  course,  the  very  cause  which  makes  a 
tax  necessary,  facilitates  the  payment  of  it." 1  A  writer 
in  "  The  Boston  Gazette  " 2  held  a  similar  view.  He  de- 
clared there  was  too  much  money,  and  that  a  tax  ought 
to  be  laid,  and  not  a  light  one  either.  "  Money  without 
credit  is  no  money,"  he  correctly  observed. 

1  Ibid.,  p.  3. 

Webster  continues  tbe  consideration  of  the  subject  by  declaring  that 
u  the  tax  ought  to  be  equal  to  the  excess  of  the  currency,  so  as  to  lessen 
the  currency  down  to  that  quantity  which  is  necessary  for  a  medium  of 
trade,  and  this,  in  my  opinion,  ought  to  be  done  by  every  state,  whether 
money  is  immediately  wanted  in  the  public  treasury  or  not,  for  it  is 
better  for  any  state  to  have  their  excess  of  money,  though  it  were  all 
gold  and  silver,  hoarded  in  a  public  treasury  or  bank,  than  circulated 
among  the  people,  for  nothing  can  have  worse  effects  on  any  state  than 
an  excess  of  money.  The  poverty  of  the  states  of  Holland,  where  no- 
body can  have  money  who  does  not  first  earn  it,  has  produced  industry, 
frugality,  economy,  good  habits  of  body  and  mind,  and  durable  and 
well-established  riches,  whilst  the  excess  of  money  has  produced  the 
contrary  in  Spain,  i.e.  has  ruined  their  industry  and  economy,  and  filled 
them  with  pride  and  poverty. 

"  But  there  is,  besides  this  general  principle,  a  special  reason  in  our 
case,  why  we  should  pay  a  large  part  of  our  Continental  debt  by  a 
present  tax;  the  great  consumption  of  our  armies,  and  stoppage  of  our 
imports,  make  a  great  demand  for  the  produce  of  our  lands,  the  fabrics 
of  our  tradesmen  and  the  labor  of  our  people,  and  of  course  raises  the 
prices  of  all  these  much  higher  than  usual,  so  that  the  husbandman, 
tradesman  and  laborer  get  money  much  faster  and  easier  than  they  used 
to  do,  and  it  is  a  plain  maxim,  that  people  should  always  pay  their  debts 
when  they  have  a  good  run  of  business,  and  have  money  plenty,  many  a 
man  has  been  distressed  for  a  debt  when  business  and  money  were 
scarce,  which  he  had  neglected  to  pay  when  he  could  have  done  it  with 
great  ease  to  himself  had  he  attended  to  it  in  its  proper  season;  this 
applies  to  a  community  or  state  as  well  as  to  a  private  person.,, 

2  Feb.  2,  1778. 


1775-80.] 


TAXATION. 


Early  in  January,1  1777,  Congress  recommended  the 
Legislatures  of  the  several  States  to  pass  resolutions  mak- 
ing provision  for  withdrawing  and  sinking  their  respective 
quotas  of  the  bills  emitted  by  Congress  at  the  several 
periods  fixed  by  that  body,  and  to  "  raise  by  taxation  in 
the  course  of  the  ensuing  year,  and  remit  to  the  treasury 
such  sums  of  money  as  they  shall  think  will  be  most 
proper  in  the  present  situation  of  the  inhabitants,  which 
sums  shall  be  carried  to  their  credit  and  accounted  in  the 
settlement  of  their  proportion  of  the  public  expenses  and 
debts,  for  which  the  United  States  are  jointly  bound." 
Thus  all  the  authority  possessed  by  Congress  in  respect 
to  taxation  was  early  and  fully  exercised.  This  recom- 
mendation Congress  renewed  whenever  the  States  were 
asked  to  furnish  more  money. 

When  the  Articles  of  Confederation  were  adopted,  no 
additional  power  was  conferred  upon  the  General  Gov- 
ernment to  levy  and  collect  taxes,  though  the  necessity 
of  enlarging  its  scope  in  this  direction  must  have  been 
very  apparent.  The  Eighth  Article  merely  provided  that 
all  charges  of  war,  and  other  expenses  incurred  for  the 
common  defence  and  general  welfare,  should  be  defrayed 
out  of  a  common  treasury,  which  should  be  supplied  by 
the  several  States,  in  proportion  to  the  value  of  all  land 
and  the  buildings  and  improvements  thereon,  within  each 
State,  belonging  to  any  person.  As  though  this  provision 
did  not  sufficiently  guard  the  States  against  Federal  usur- 
pation, the  article  further  provided  that  "the  taxes  for 
paying  that  proportion  shall  be  laid  and  levied  by  the 
authority  and  direction  of  the  legislatures  of  the  several 


1  Jan.  14. 


194        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 

states."  There  was  no  weaker  link  in  the  chain  of  the 
Articles  of  Confederation.  The  States,  however,  were 
so  jealous  of  their  rights,  notwithstanding  their  slowness 
to  exercise  them,  that  no  stronger  link  could  be  forged. 
During  Morris's  administration,  when  this  defect  was 
generally  seen,  all  attempts  to  amend  the  Articles,  and 
grant  to  the  government  power  to  collect  taxes  on  im- 
portations, signally  failed.1  The  people  suffered  six  years 
longer  before  they  relinquished  this  right  as  members  of 
States  to  enjoy  it  as  members  of  the  Federal  Government. 

Throughout  the  entire  period  from  1774  to  1789,  only 
very  small  sums  flowed  into  the  general  treasury  from  the 
State  coffers.  As  the  power  to  tax  belonged  to  the  States, 
Congress  dared  not  attempt  such  a  thing ;  nor  would  the 
experiment  at  any  time  have  been  a  prudent  one  to  try. 
Congress,  it  is  true,  did  stretch  their  authority  in  several 
directions,  slowly  and  with  judicious  care ;  but  the  right 
of  taxation  was  regarded  by  the  States  with  peculiar 
jealousy.  Having  thrown  off  allegiance  to  Great  Britain 
mainly  because  she  assumed  the  right  to  tax  the  Colonies 
without  their  consent,  the  people  were  in  no  mood  to 
substitute  the  General  Government  for  Great  Britain  in 
this  regard.  From  first  to  last,  the  States  insisted  upon 
retaining  the  power  to  tax,  and  consequently  Congress 
was  obliged  to  trust  wholly  to  them  for  funds  raised 
in  this  manner.  Unlike  the  states  of  the  Hellenic  Con- 
federation, which  raised  money,  and  placed  it  under  the 
control  of  Attica,  the  stronger  state,  to  be  used  in  mak- 
ing preparation  for  resisting  future  Persian  invasions,  the 
States  of  the  American  Union  neither  contributed  as  they 

i  March  20,  1783;  April  1,  1783;  Aug.  28,  1783. 


1775-80.] 


TAXATION. 


195 


should  to  sustain  the  National  Government,  nor  raised 
much  to  support  their  own  local  organizations. 

There  is  no  weaker  spot  in  the  financial  history  of 
these  times  than  the  unwillingness  or  failure  of  the  States 
to  tax  at  once  and  deeply,  as  soon  as  the  first  issues  of 
paper  money  were  sent  forth  by  Congress.  In  the  ad- 
dresses of  that  body  the  States  were  urged  in  the 
strongest  way  to  levy  and  collect  adequate  taxes  for  the 
purpose  of  retiring  the  paper  circulation,  and  raising 
funds  to  support  the  government.  In  the  address  issued 
in  November,  1777,  after  describing  the  depreciation  of 
the  currency  and  the  consequences  to  be  apprehended 
from  the  event,  the  tendency  to  the  depravity  of  morals, 
the  decay  of  public  virtue,  a  precarious  supply  for  the  war, 
debasement  of  the  public  faith,  injustice  to  individuals, 
and  the  destruction  of  the  honor,  safety,  and  independence 
of  the  United  States,  Congress  added,  "  Loudly  therefore 
are  we  called  upon  to  provide  a  reasonable  and  effectual 
remedy.  Hitherto  spared  from  taxes  let  them  now  with 
a  cheerful  heart,  contribute  according  to  their  circum- 
stances." 

In  May,  a  year  afterward,  Congress  issued  another 
address,  in  which  the  necessity  of  taxation  was  consid- 
ered. "  Is  there,"  says  Congress,  "  a  country  upon  earth 
which  hath  such  resources  for  the  payment  of  her  debts 
as  America?  such  an  extensive  territory?  so  fertile,  so 
blessed  in  its  climate  and  productions?  Surely  there  is 
none.  Neither  is  there  any  to  which  the  wise  Europeans 
will  sooner  confide  their  property.  What  then  are  the 
reasons  that  your  money  hath  depreciated?"  What 
reply  did  Congress  make  ?    "  Because  no  taxes  have  been 


196        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 


imposed  to  carry  on  the  war,"  to  which  other  reasons 
of  a  minor  character  were  added.  In  this  address,  Con- 
gress urged  the  States  in  the  strongest  manner  to  sink 
their  bills  by  taxation ;  and  in  many  other  addresses  of 
Congress  was  the  necessity  of  State  taxation  clearly  set 
forth.  Notwithstanding  these  appeals,  the  States  failed 
utterly  to  collect  more  than  a  small  sum  for  the  benefit  of 
the  General  Government. 

The  need  of  taxation  was  quite  as  clearly  seen  by  indi- 
viduals as  by  Congress.  John  Adams  wrote  in  August, 
1777,1  about  redressing  the  evils  of  paper  money,  "  Taxa- 
tion as  deep  as  possible  is  the  only  radical  cure."  The 
same  doctrine  was  echoed  in  the  newspapers  throughout  * 
the  country.2 

1  Familiar  Letters,  p.  293. 

2  A  person  wrote  in  Penn.  Packet,  March  5,  1782,  "Artful  men  have 
endeavored  to  spread  an  opinion  that  the  taxes  are  too  heavy,  and 
weak  men  are  inclined  to  a  belief  in  their  assertion;  but  if  seeing  is 
believing,  we  are  bound  to  believe  the  direct  contrary.  It  is  possible 
enough  that  the  taxes  are  unequal,  and  that  amendment  might  be  made 
in  the  mode  of  levying  and  collecting  them;  but  as  to  the  amount, 
it  is  but  trifling  compared  with  the  taxes  we  have  actually  paid." 

A  writer  in  the  Boston  Gazette  says,  "As  our  debt  is  large,  we  must 
be  willing  to  pay  a  large  tax;  and  it  is  not  for  me  to  say  how  large;  but 
it  must  be  in  proportion  to  the  bills  we  have  emitted.  This,  and  this 
only,  will  prevent  the  great  difficulties  that  we  labor  under,  and  have 
long  been  complaining  of.  For,  as  heretofore,  both  merchants  and 
farmers  have  been  fond  of  keeping  their  goods,  because  they  found  that 
was  the  best  way  to  make  the  most  of  them,  as  they  were  continually 
rising  in  their  hands;  or  rather,  if  they  took  the  money  for  them,  that 
would  be  falling  and  depreciating  in  their  hands.  So  now,  if  we  are 
taxed  in  some  gtfod  measure  equal  to  our  debt,  and  the  people  are 
hereby  convinced  that  the  money  is  to  be  made  good,  and  the  credit 
thereof  punctually  maintained,  they  will  immediately  find,  that,  in- 


1775-80.1 


TAXATION. 


197 


It  is  true  the  States  did  not  wholly  omit  to  levy  and 
collect  taxes  during  the  early  period  of  the  war ;  but 
they  were  much  lighter  than  they  should  have  been. 
A  writer  in  "  The  Connecticut  Courant " 1  affirmed 
toward  the  close  of  1776,  "As  to  taxes,  there  have  been 
none,  or  next  to  none,  for  some  time.  True,  they  begin 
now  in  a  low  degree  to  take  place."  The  neglect  of  the 
States  in  this  regard  was  a  grave  mistake  which  could 
not  easily  be  repaired. 

Heavy  taxes  were  indeed  laid  by  the  States  after  con- 
siderable delay;  but  the  omission  to  levy  them  earlier, 
paved  the  way  for  dilatoriness  in  their  collection  and 
payment.2  People  everywhere  complained  of  the  weight 
of  taxes,3  yet  too  often  evaded  the  duty  of  paying  them.4 
Great  as  was  the  burden,  there  were  individuals  who 
bore  it  without  a  murmur.    "  I  hope  you  will  pay  every 

stead  of  articles  of  merchandise  or  provisions  rising  in  their  hands, 
they  will  begin  to  fall.  And  as  the  scarcity  that  has  appeared,  has  not 
been  altogether  real,  but  artificial,  we  shall  soon  see  many  things  ex- 
posed to  sale,  and  the  price  falling  as  fast  as  it  rose,  and  we  shall  have 
reason  to  think  and  hope,  that  things  will  soon  come  to  right  and 
standard."    Feb.  2,  17T8. 

1  Dec.  27,  1776,  see  Ibid.,  Jan.  3,  1777,  and  Jan.  13,  1777. 

2  Ellery  and  Collins,  delegates  from  Rhode  Island,  made  a  shrewd 
suggestion  on  one  occasion,  when  they  were  requested  to  get  the  sum 
apportioned  to  that  State  by  Congress  reduced:  " The  more  we  pay  now, 
the  less  we  shall  have  to  pay  hereafter,  when  the  money  may  be 
appreciated."  It  was  March  2,  1779,  when  they  thus  wrote  to  the 
Governor  of  Rhode  Island.  Staples' s  Hist,  of  B.  I.  in  the  Cont.  Cong., 
p.  210. 

8  See  Letter  of  Pickering,  Sept.  22,  1782,  Life  of  Pickering,  vol.  i. 
p.  375. 

4  Sparks's  Franklin,  vol.  x.  p.  45;  Wells's  Life  of  S.  Adams,  vol.  iii. 
pp.  163-165. 


198        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 

tax  that  is  brought  you,"  wrote  John  Adams  to  his  wife,1 
"  if  you  sell  my  books  or  clothes,  or  oxen,  or  your  cows 
to  pay  it."  At  one  time  she  informs  him,  "  rates  high ; 
that,  I  suppose,  you  will  rejoice  at,  so  would  I,  did  it 
remedy  the  evil." 2  In  October,  1780,  she  writes  again 
about  "  enormous  taxes." 3  The  more  patriotic  undoubt- 
edly paid;  but  many  certainly  did  not,  for,  if  they  had, 
there  would  not  have  been  such  a  dearth  of  funds  in  the 
public  treasury. 

If  the  people  were  unwilling  to  pay  taxes  directly  to 
redeem  a  sinking  currency,  they  could  not  escape  pay- 
ing them  in  another  form  infinitely  worse,  because  they 
were  more  unequal.  Depreciation  was  a  constant  tax 
on  all  who  received  paper  money.  A  merchant  who 
received  bills  of  credit  lost  a  portion  of  their  value 
before  he  could  part  with  them.  This  loss  operated  as  a 
tax  on  him,  which  in  many  cases  was  very  unequal  and 
unjust.  The  loss  to  the  creditor  class,  especially  to 
those  who  had  loaned  gold  and  silver,  and  were  paid 
in  almost  worthless  paper,  was  fearful.  Livingston  4  con- 
cluded that  the  States  had  sufficient  resources  to  bear 
the  burden,  because,  though  unequal,  it  had  been  borne, 
and  had  not  produced  national  ruin.  This  was  correct 
reasoning,  doubtless :  nevertheless  the  losses  to  some 
individuals  and  associations  supported  by  trust  funds 
were  enormous. 

As  secretary  of  foreign  affairs,  Livingston  wrote  in  Feb- 
ruary, 1782,  to  the  governors  of  the  States,5  44  From  the 

i  Familiar  Letters,  p.  293.         2  Ibid.,  p.  365.         8  Ibid.,  p.  388. 
4  Letter  to  Jay,  Nov.  1,  1781,  Dip.  Cor.,  vol.  vii.  p.  508. 
6  Feb.  19,  Dip.  Cor.,  vol.  xi.  p.  225. 


1775-80.] 


TAXATION. 


199 


time  that  the  depreciation  of  the  continental  bills  of  credit 
began,  till  they  were  no  longer  current,  the  states  that 
received  them  paid  a  tax  equal  to  all  the  expenditures 
of  the  army,  and  a  very  considerable  one  beyond  it ; 
for  if  we  suppose  ten  millions  of  dollars,  in  specie,  a 
year,  to  be  necessary  for  their  support,  then  the  expense, 
till  the  close  of  the  campaign  of  1779,  must  have 
amounted  to  upwards  of  fifty  millions,  exclusive  of  the 
supplies  from  Europe ;  and  yet,  in  March,  1780,  the 
whole  national  debt  contracted  in  America  did  not,  in 
fact,  amount  to  five  millions;  so  that  forty-five  millions 
were  paid  by  the  United  States  in  those  five  years  of  the 
war,  when  they  had  the  least  commerce  and  agriculture, 
and  when  they  were  most  distressed  by  the  enemy ;  and 
this  tax,  too,  was  the  most  unjust  and  partial  that  can 
be  conceived,  unless  we  except  that,  by  which  we  have 
since  raised  much  more  from  the  people,  without  giving 
so  much  to  tlxa  public ;  I  mean  the  laws  for  impressing, 
&c,  which  placed  the  greatest  burden  of  the  war  upon 
the  shoulders  of  a  particular  order  of  men  in  particular 
states  only." 

Yet  John  Adams  regarded  depreciation  as  a  real  ad- 
vantage.1 Not  so  thought  the  clearer-minded  Webster.2 
Having  shown  how  all  the  expenditures  of  the  war  for 
the  first  three  years,  except  foreign  debts  and  internal 
loans,  had  been  paid  in  depreciation  of  the  currency, 
which  was  perhaps  the  most  inconvenient  method  of 
levying  public  taxes  that  could  be  invented,  he  then 
proceeds,  by  fact  and  argument,  to  prove  his  point  so 

1  Letter  to  Capellen,  Jan.  21,  1781,  Works,  vol.  vii.  p.  357. 

2  Political  Essays,  p.  29. 


200       FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 


clearly  that  none  could  question  it.  "I  imagine,"  he 
says,  "it  will  not  be  disputed  that  the  depreciation  for 
three  years  past  has  been  at  least  fifty  per  cent  per 
annum,  i.e.  that  one  hundred  pounds  at  the  end  of  the 
year,  would  not  buy  more  goods  than  fifty  pounds  would 
have  purchased  at  the  beginning  of  the  year.  Try  it 
for  the  year  past :  in  August,  1778,  fifty  pounds  would 
have  purchased  sixteen  hundred  of  flour,  fifty  bushels  of 
Indian  corn,  five  hundred  of  bar  iron,  one  and  an  half 
hundred  of  sugar,  twelve  pounds  of  hard  money,  &c. 
See  if  one  hundred  pounds  will  buy  as  much  now.  This 
is  arguing  on  fact,  which  is  stubborn  and  yields  to  the 
prejudice  of  no  man."  1 

1  "  It  appears  then  that  a  man  who  has  kept  one  hundred  pounds  by 
him  for  the  space  of  one  year,  'is  to  all  intents  in  the  same  condition  he 
would  have  been  in,  if  the  hundred  pounds  had  kept  its  value  unde- 
preciated, and  he  had  paid  one  half  of  it  in  a  tax,  i.e.  in  both  cases  he 
would  have  had  fifty  pounds  and  no  more  left.  He  has  then,  to  all 
intents  and  purposes,  paid  a  tax  of  fifty  pounds  for  the  year  towards  the 
depreciation,  and  has  now  fifty  pounds  less  money  than  he  would  have 
had  if  no  depreciation  had  taken  place,  as  much  in  every  respect,  as  his 
cash  would  have  lessened  fifty  pounds  by  paying  a  tax  of  that  sum. 

"I  have  heard  that  this  plea  was  made  use  of  by  the  Agents  of  the 
New  England  colonies,  when  the  matter  of  reimbursements  to  those 
colonies,  for  their  great  expenditures  in  the  two  last  wars,  was  debated 
and  granted  in  the  British  Parliament,  and  the  argument  allowed  to  be 
a  good  one.  The  question  was,  what  sums  those  colonies  had  emitted 
for  the  service  of  the  wars,  and  what  was  the  value  of  the  bills  to  be 
redeemed  ?  the  Agents  pleaded,  that  the  value  was  to  be  estimated  at 
the  time  of  emission,  not  at  the  time  of  redemption  of  those  bills;  for 
when  bills  of  credit  depreciate  in  any  country,  the  depreciation  is  as 
much  a  tax  on  the  inhabitants  as  the  depreciated  sum  would  be,  if 
levied  in  the  usual  way  of  assessment  on  polls  and  estates.  The  argu- 
ment is  indeed  a  demonstrable  one,  and  supported  and  justified  by  plain 
fact  in  every  view;  yet  there  is  such  a  subtle  and  strong  delusion  in  the 


IT  75-80.] 


TAXATION. 


201 


There  were  many  who  regarded  depreciation  very  dif- 
ferently from  Webster.  Said  a  plausible  writer  in  "  The 
Pennsylvania  Packet,"  1  "  There  is  at  present  no  absolute 
necessity  for  high  government  taxes,  the  natural  unavoid- 
able tax  of  depreciation  is  the  most  certain,  expeditious, 
and  equal  tax  that  could  be  devised.  Upon  the  scale 
which  has  lately  existed,  every  possessor  of  money  has 
paid  a  tax  for  it,  in  proportion  to  the  time  he  held  it. 
Like  a  hackney  coach  it  must  be  paid  for  by  the  hour." 
Having  shown  that  the  two  hundred  millions  of  paper 
issued  by  the  government  were  equivalent  to  forty-eight 
millions  of  specie,  had  the  latter  been  employed  in  mak- 
ing payments,  he  asserts  that  forty-three  millions  of  the 
latter  sum  have  been  paid  by  the  tax  of  depreciation, 
leaving  only  five  millions  to  be  discharged.  "Now  I 
would  ask  the  best  financier  amongst  us,  whether  in  four 
years  he  could  have  levied  a  tax  of  forty  three  millions 
of  hard  dollars,  in  a  more  equal  or  less  expensive  way  ? 
There  have  been  no  commissions  to  pay,  no  embezzle- 
ments, no  public  defaulters,  and  no  appeals,  except  by 
the  possessors  of  old  contracts,  who  have  been  ungener- 
ously and  unjustly  paid  off  in  current  nominal  value, 
under  sanction  of  laws,  which  ought  long  ago  to  have 
been  repealed." 

The  truth  was,  paper  money  having  depreciated  enor- 

depreciation  as  obscures  the  subject,  and  will  almost  cheat  a  man  who 
views  it  under  full  conviction,  and  feels  the  effects  of  it ;  and  this  tends 
to  render  the  mischief  more  ruinous  than  otherwise  it  would  be,  because 
people  who  feel  it,  often  mistake  the  cause,  and  adopt  from  thence 
remedies  altogether  ineffectual,  and  sometimes  very  hurtful,  and  which 
often  tend  rather  to  increase  than  cure  the  evil." 


202 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 


mously,  and  all  remedies  having  proved  hopeless,  the 
only  course  left  for  the  leaders  of  the  Revolution  was  to 
lay  the  most  pleasant  colors  they  could  find  upon  the 
experiment.  Happily  the  idea  arose  in  the  public  mind 
of  regarding  depreciation  as  a  tax,  and  this  thought 
did  much  in  softening  the  bitterness  of  many  toward 
the  industrious  workers  of  the  paper-money  printing- 
press.  This  view  of  the  matter  was  not  altogether  un- 
sound: it  contained  enough  truth  to  satisfy  many,  and 
make  them  feel  that  depreciation,  notwithstanding  its 
great  evils,  had  also  brought  an  unexpected,  though  none 
the  less  welcome,  blessing. 

Of  all  the  writers  discerning  the  advantages  attending 
the  depreciation  of  paper  money,  none  saw  so  many,  nor 
saw  them  so  clearly,  as  Thomas  Paine.  During  the 
American  Revolution  an  elaborate  work  appeared  in 
Paris,  entitled  "  The  Political  and  Philosophical  History 
of  the  European  Settlements  in  the  East  and  West  In- 
dies," written  by  the  Abbe*  Raynal,  which  gave  him  a 
sudden,  world-wide,  and  truly  dazzling  reputation  that 
astonished  no  one  probably  so  much  as  the  author  him- 
self. The  work,  in  truth,  was  very  superficial,  and  is 
now  never  sought  for  any  information  entombed  within 
its  pages ;  and  the  heavy  coating  of  dust  lying  upon  the 
buried  volumes  in  the  great  libraries  speaks  mournfully  of 
the  utter  extinguishment  of  the  reputation  of  the  author. 
When  the  Forty-for-one  Act  was  passed  by  Congress,  in 
March,  1781,  the  details  of  which  have  been  already 
described,  Raynal  wrote  a  letter  upon  the  finances  of 
America,  criticising  the  administration  of  them  in  severe 
terms.    Among  other  matters   discussed   by  him  was 


1775-80.] 


TAXATION. 


203 


the  above-mentioned  Act  and  the  depreciation  of  paper 
money.  Paine  answered  this  communication,  prefacing 
his  own  letter  with  the  remark  that  paper  money,  though 
issued  by  Congress  under  the  name  of  dollars,  was  not 
all  of  equal  value.  The  issues  of  the  first  year  were 
equal  to  gold  and  silver ;  those  of  the  second  year  were 
worth  less ;  and  so,  for  five  years,  the  issue  of  each  year 
was  of  less  value  than  that  of  the  preceding  year,  until 
the  end  of  the  fifth  year.  "  I  imagine,"  says  Paine,1  "  that 
the  whole  value  at  which  Congress  might  pay  away  the 
several  emissions,  taking  them  together  was  about  ten 
or  twelve  million  pounds  sterling." 

As  it  would  have  taken  ten  or  twelve  millions  sterling 
of  taxes  to  carry  on  the  war  for  so  long  a  period ;  "  and 
as  while  this  money  was  issuing,  and  likewise  depreciating 
down  to  nothing,  there  were  none,  or  few  valuable  taxes 
paid ;  consequently  the  event  to  the  public  was  the  same, 
whether  they  sunk  ten  or  twelve  millions  of  expended 
money,  by  depreciation,  or  paid  ten  or  twelve  millions  by 
taxation ;  for  as  they  did  not  do  both,  and  chose  to  do 
one,  the  matter  which,  in  a  general  view,  was  indifferent. 
And,  therefore,  what  the  Abbe  supposes  to  be  a  debt,  has 
now  no  existence;  it  having  been  paid,  by  everybody 
consenting,  to  reduce  at  his  own  expense,  from  the  value 
of  the  bills  continually  passing  among  themselves,  a  sum, 
equal  to  nearly  what  the  expense  of  the  war  was  for  five 
years." 

Paper  money,  however,  had  now  ceased,  and  so,  of 
course,  had  the  depreciation  of  it,  while  gold  and  silver 
had  resumed  their  former  sway.    The  war  was  to  be 

1  Letter  addressed  to  the  ALbe  Raynal,  Phil.,  1782,  p.  26. 


204        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 

maintained  by  taxation,  which,  happily,  Paine  affirmed, 
would  take  from  the  public  a  smaller  sum  than  deprecia- 
tion drew ;  "  but  as  while  they  pay  the  former,  they  do 
not  suffer  the  latter,  and  as  when  they  suffered  the  latter, 
they  did  not  pay  the  former,  the  thing  will  be  nearly 
equal,  with  this  moral  advantage,  that  taxation  occasions 
frugality  and  thought,  and  depreciation  produced  dissipa- 
tion and  carelessness." 

Paine  had  now  reached  a  pinnacle  of  reasoning  suf- 
ficiently high  to  fly  easily  in  almost  any  direction.  Ac- 
cordingly he  ventures  forth  in  this  fashion :  "  If  a  man's 
portion  of  taxes  comes  to  less  than  what  he  lost  by  the 
depreciation,  it  proves  the  alteration  is  in  his  favor.  If  it 
comes  to  more,  and  he  is  justly  assessed,  it  shows  that  he 
did  not  sustain  his  proper  share  of  depreciation,  because 
the  one  was  as  positively  his  tax  as  the  other. 

"  It  is  true,"  he  continues,  "  that  it  never  was  intended, 
neither  was  it  foreseen,  that  the  debt  contained  in  the 
paper  currency  should  sink  itself  in  this  manner,  but  as 
by  the  voluntary  conduct  of  all  and  of  every  one  it  has 
arrived  at  this  state,  the  debt  is  paid  by  those  who  owed 
it.  Perhaps  nothing  was  ever  so  universally  the  act  of  a 
country  as  this.  Government  had  no  hand  in  it.  Every 
man  depreciated  his  own  money  by  his  own  consent,  for 
such  was  the  effect,  which  the  raising  the  nominal  value 
of  goods  produced.  But  as  by  such  reduction  he  sus- 
tained a  loss  equal  to  what  he  must  have  paid  to  sink  it 
by  taxation,  therefore  the  line  of  justice  is  to  consider 
his  loss  by  the  depreciation  as  his  tax  for  that  time,  and 
not  to  tax  him  when  the  war  is  over,  to  make  that 
money  good  in  any  other  person's  hands,  which  became 
nothing  in  his  own. 


1775-80.] 


TAXATION. 


205 


"  Again,  the  paper  currency  was  issued  for  the  ex- 
press purpose  of  carrying  on  the  war.  It  has  performed 
that  service,  without  any  other  material  charge  to  the 
public,  while  it  lasted.  But  to  suppose,  as  some  did, 
that,  at  the  end  of  the  war,  it  was  to  grow  into  gold 
and  silver,  or  to  become  equal  thereto,  was  to  suppose 
that  we  were  to  get  two  hundred  millions  of  dollars 
by  going  to  war,  instead  of  paying  the  cost  of  carrying 
it  on." 

The  effect  produced  upon  the  Abbe's  mind  b}^  Paine's 
answer  was  never  known.  But  one  thing  is  certain,  the 
answer  displayed  as  much  wisdom  as  the  Abbe's  discus- 
sion of  American  finances,  and  far  more  ingenuity.  In 
those  days,  when  financial  questions  were  not  probed  so 
deeply  nor  thoroughly  as  they  are  now,  it  is  highly  proba- 
ble that  Paine's  answer  was  by  many  deemed  as  complete 
as  it  was  consoling.  That  depreciation  operated  as  a  tax. 
which  all  paid  in  varying  proportions,  was,  doubtless,  to 
many,  an  unexpected  revelation ;  but  it  was  not  for  that 
reason  any  the  less  readily  and  joyfully  accepted  by  them 
as  true  and  satisfying. 


206        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 


CHAPTER  XV. 

PLEDGES  AND  ARGUMENTS. 

If  it  be  possible  to  maintain  the  value  of  paper  money 
by  solemn  pledges  of  redemption,  surely  the  paper  emis- 
sions of  the  Continental  Congress  ought  to  have  been 
maintained ;  for  the  faith  of  that  body  was  pledged  re- 
peatedly to  the  faithful  fulfilment  of  their  monetary  obli- 
gations. The  following  vote  of  Congress  is  a  fair  speci- 
men of  the  action  of  Congress  on  the  subject:  "Whereas 
a  report  hath  circulated  in  divers  parts  of  America,  that 
Congress  would  not  redeem  the  bills  of  credit  issued  by 
them  to  defray  the  expenses  of  the  war,  but  would  suffer 
them  to  sink  in  the  hajids  of  the  holder,  whereby  the 
value  of  the  .  said  bills  hath,  in  the  opinion  of  many  of 
the  good  people  of  these  States,  depreciated ;  and  lest 
the  silence  of  Congress  might  give  strength  to  the  said 
report ;  resolved  that  the  said  report  is  false  and  deroga- 
tory to  the  honor  of  Congress."  This  was  in  December, 
1778,1  and  as  paper  money  depreciated  more  and  more, 
the  pledges  of  Congress  in  respect  to  its  redemption  were 
more  frequent,  and  intense  in  form  of  expression.  In 
addresses  issued,  as  well  as  in  special  resolves,  Congress 
heaped  pledge  upon  pledge ;  and  this  practice  was  contin- 
ued until  nearly  all  value  was  gone  out  of  the  bills,  and 

1  Dec.  29. 


1779.] 


PLEDGES  AND  ARGUMENTS. 


207 


within  a  very  short  period  of  the  time  when  Congress 
passed  the  Forty-for-one  Act,  which  was  a  direct  viola- 
tion of  the  entire  stream  of  promises  that  had  been 
unceasingly  flowing  from  nearly  the  beginning  of  the 
creation  of  paper  money. 

In  September,  1779,1  Congress  sent  forth  a  spirited 
address  portraying  the  situation,  in  which,  among  other 
questions,  was  the  following:  "whether,  admitting  the 
ability  and  political  capacity  of  the  United  States  to 
redeem  their  bills,  there  is  any  reason  to  apprehend  a 
wanton  violation  of  the  public  faith  ?  "  To  this  question 
Congress  uttered  a  disdainful  negative ;  yet  six  months 
had  scarcely  passed,  when  that  body  declared 2  that  the 
United  States  having  been  driven  into  a  just  and  neces- 
sary war  at  a  time  when  no  regular  civil  governments 
were  established  of  sufficient  energy  to  enforce  the  col- 
lection of  taxes  or  to  provide  funds  for  the  redemption 
of  such  bills  of  credit  as  their  necessities  obliged  them 
to  issue,  and  before  the  powers  of  Europe  were  sufficiently 
convinced  of  the  justice  of  their  cause,  or  of  the  probable 
event  of  the  controversy,  to  afford  them  aid  or  credit,  in 
consequence  of  which  their  bills  increasing  in  quantity 
beyond  the  sum  necessary  for  the  purpose  of  a  circulating 
medium,  and  wanting  at  the  same  time  specific  funds  to 
rest  on  for  their  redemption,  had  daily  sunk  in  value, 
notwithstanding  every  effort  that  had  been  made  to  sup- 
port the  same,  insomuch  that  they  were  then  passed  by 
common  consent  in  most  parts  of  the  United  States  at 
least  thirty-nine  fortieths  below  their  nominal  value,  and 
still  remained  in  a  state  of  depreciation,  whereby  the 


1  Sept.  13. 


2  March  18,  1780. 


208        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 

community  suffered  great  injustice,  the  public  finances 
were  deranged,  and  the  necessary  dispositions  for  the  de- 
fence of  the  country  were  much  impeded  and  perplexed ; 
and  whereas,  effectually  to  remedy  these  evils,  for  which 
purpose  the  United  States  had  now  become  competent, 
their  independence  being  well  assured,  it  was  necessary 
speedily  to  reduce  the  quantity  of  the  paper  medium  in 
circulation,  and  to  establish  and  appropriate  such  funds 
as  should  insure  the  punctual  redemption  of  the  bills :  — 
for  these  reasons  it  was  resolved  to  receive  silver  and 
gold  in  payment  of  the  quotas  assigned  to  the  States  at 
the  rate  of  one  Spanish  milled  dollar  in  lieu  of  forty 
dollars  of  the  bills  then  in  circulation. 

Let  no  one  imagine  that  this  Act  of  Congress  was 
passed  without  opposition,  or  that  the  news  of  it  was 
received  by  the  country  without  surprise.  There  were 
many  who  believed  that  in  no  event  would  Congress 
violate  the  public  faith.1  Yet  the  act  was  done :  "  the 
safest  possible  currency,"  "  the  only  currency  which  would 
not  take  to  itself  wings  and  disappear,"  was  disappearing 
at  a  fearful  rate,  and  in  a  short  time  would  utterly  vanish. 

Indeed,  in  a  few  years,  public  sentiment  had  changed 
so  rapidly,  that  the  rejoicing  was  very  general  over  the 
disappearance  of  Continental  money.  Webster2  declares 
this  to  be  the  fact,  nor  is  there  any  reason  for  questioning 
the  truth  of  the  statement. 

Many  arguments  were  used  showing  the  security  for 
the  ultimate  payment  of  paper  money ;  perhaps  the  most 
favorite  argument  was  the  one  used  by  Webster.3  It 

1  Ante,  p.  131.  2  Political  Essays,  p.  4,  note. 

8  Political  Essays,  p.  4,  note  b. 


1779.] 


PLEDGES  AND  ARGUMENTS. 


209 


was  "a  debt  of  great  honor  and  justice,  of  national 
honor  and  justice,  not  barely  empty  honor,  but  that 
essential  honor  and  credit  in  which  the  safety  of  the 
state  is  comprised,  and  therefore  by  concession  of  every- 
body must  be  punctually  and  honorably  paid  in  due 
time :  otherwise  all  security  arising  from  public  credit 
must  be  lost,  all  confidence  of  individuals  in  our  public 
councils  must  be  destroyed,  and  great  injustice  must  be 
done  to  every  possessor  of  our  public  currency,  to  the 
detriment  of  all,  and  ruin  of  many  who  have  placed 
most  confidence  in  our  public  administration ;  and  noth- 
ing but  shame,  scandal  and  contempt  can  ensue  for 
which  nothing  but  most  inevitable  necessity  can  be  any 
reasonable  excuse."  This  was  written  in  1776 :  several 
years  afterward,  when  his  essays  were  republished  in  a 
volume,  he  says,  that,  at  the  time  of  writing  the  fore- 
going observations,  he  "had  no  conception  that  the 
Continental  money  could  continue  to  be  a  quick  currency 
at  five  hundred  for  one,  and  finally  run  itself  out  to  noth- 
ing, and  die,  not  only  without  any  tumult,  but  with  the 
general  satisfaction  of  the  people."  It  was  found  out, 
that,  after  all,  paper  money  did  not  constitute  a  lien  upon 
the  real  estate  and  other  property  of  the  country  which 
could  not  be  released  whenever  Congress  chose.  Paper 
money  was  fiat  money ;  Congress  made  it,  and  Congress 
could  destroy  it :  it  was  impossible  for  that  power  or  any 
other  to  offer  a  security  which  could  not  be  taken  away, 
or  make  a  pledge  which  could  not  be  broken.1 

1  See  Memorial  of  Public  Creditors  addressed  to  Congress  Dec.  20, 
1790,  Am.  State  Papers  by  Lowrie  and  Clarke,  Finance,  vol.  i.  p.  76,  in 
which  the  history  of  that  body  in  dealing  with  the  public  creditors  is 
set  forth. 


210 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-81. 


CHAPTER  XVI. 

SPECULATION,  CORRUPTION,  AND  REPUDIATION. 

The  worst  effects  of  issuing  paper  money  remain  to  be 
described.  Speculation  spread,  over  the  land,  attended 
with  luxurious  living  and  corrupt  dealing,  and  followed 
by  public  monetary  repudiation.  The  moral  effect  of 
these  events  was  long  felt,  like  the  ocean,  which  is  not 
soon  stilled  after  a  violent  wind  has  swept  over  it. 

The  first  effect  worthy  of  note  is  the  speculation  to 
which  paper  money  gave  rise.  Just  as  the  depreciation 
of  paper  money  during  the  late  war  unsettled  prices, 
and  thus  inaugurated  an  era  of  extraordinary  speculation, 
so,  in  the  period  under  review,  paper  emissions,  by  up- 
setting the  former  range  of  prices,  gave  a  wonderful 
impetus  to  speculation,  which  acted  as  a  terrible  blight 
upon  the  prosperity  and  morals  of  the  people.1 

Much  of  the  speculation  of  the  time  was  carried  on 

1  "The  first  visible  effect  of  an  augmentation  of  the  medium  and 
the  consequent  fluctuation  of  value,  was,  a  host  of  jockeys,  who  fol- 
lowed a  species  of  itinerant  commerce;  and  subsisted  upon  the  igno- 
rance and  honesty  of  the  country  people ;  or  in  other  words,  upon  the 
difference  in  the  value  of  the  currency,  in  different  places.  Perhaps 
we  may  safely  estimate,  that  not  less  than  20,000  men  in  America,  left 
honest  callings,  and  applied  themselves  to  this  knavish  traffic.  A 
sudden  augmentation  of  currency  flattered  people  with  the  prospect 
of  accumulating  property  without  labor."  — No  ah  Webster,  Coll.  of 
Essays,  p.  105. 


1775-81.]    SPECULATION,  CORRUPTION,  REPUDIATION. 


211 


by  government  officials.1  James  Lovell,2  writing  for 
the  committee  of  foreign  affairs  to  the  foreign  com- 
missioners, remarked,  "The  manners  of  the  continent 
are  too  much  affected  by  depreciation  of  our  currency; 
scarce  an  officer,3  civil  or  military,  but  feels  something 
of  a  desire  to  be  concerned  in  mercantile  speculation, 
from  finding  that  his  salary  is  inadequate  to  the  heavy 
demands  which  are  made  upon  him  for  the  necessaries 
of  life,  and  from  observing  that  but  little  skill  is  neces- 

1  See  letter  in  Penn.  Archives,  vol.  vi.  p.  212.  A  very  depressing, 
but  we  fear  altogether  too  common,  picture  of  the  way  the  affairs 
of  the  army  were  managed  is  given  by  President  Reed  during  a  tour  of 
investigation  through  Pennsylvania  with  reference  to  the  collection  of 
revenues  in  that  State.  The  account  is  contained  in  a  letter  dated  from 
Bethlehem,  Oct.  5,  1780,  to  George  Bryan.  "  The  abuses  of  the  quarter- 
master's department  are  great  and  many.  A  practice  has  obtained  here 
to  sell  continental  property  by  appraisement,  and  it  has  proved  a  very 
convenient  mode  to  gratify  a  friend  with  a  good  team  or  horse,  at  one- 
third  the  value.  Here  is  a  commissary,  on  pay,  rations,  and  forage, 
with  a  waiter,  to  supply  six  Hessians,  who  work  about  the  town,  but 
I  should  rather  say  was,  as  I  have  sent  to  Easton  to-day  to  cashier  about 
eight  or  ten  of  them.  A  mulatto  in  the  county  has  acquired  a  very 
handsome  fortune  under  Mr.  Hooper,  as  deputy  comissary,  some  say 
£10,000  specie.  Now  the  influence  is  removed,  the  people  speak  out, 
and  pretty  loudly  too,  but  I  fear  it  is  almost  too  late.  There  have  been 
at  one  time  twelve  deputy  quartermasters  in  this  county  only,  on  pay, 
rations,  and  with  clerks,  &c.  Had  a  suitable  inspection  taken  place 
twelve  months  ago,  I  am  sure  we  should  have  saved  many  thousands, 
if  not  millions."— Reed's  Life  of  Reed,  vol.  ii.  p.  283. 

2  March  24,  1778,  Dip.  Cor.  vol.  i.  p.  375. 

8  Among  other  abuses  which  crept  into  the  army  was  the  appropria- 
tion of  public  horses  to  private  use.  Says  Gen.  Greene,  "  There  was 
scarcely  an  officer  in  the  cavalry  who  had  not  from  one  to  three  public 
horses,  which  he  felt  at  liberty  to  exchange  or  sell  at  will."  — Gkeene's 
Life  of  Greene,  vol.  iii.  p.  455. 


212        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-81. 

sary  to  constitute  one  of  the  merchants  of  these  days. 
We  are  almost  a  continental  tribe  of  Jews;  but  I  hope 
heaven  has  not  yet  discovered  such  a  settled  profligacy 
in  us  as  to  cast  us  off,  even  for  a  year." 

Other  individuals  also  engaged  in  speculation.  Before 
the  States  had  received  their  new  money,  or  called  in 
their  old,  speculation  in  Boston  by  Tories  and  others 
depreciated  the  old  money  to  eighty-five,  and  even  a 
hundred  and  ten,  for  one  in  that  city.  Nor  was  this  all  : 
those  who  had  hoarded  specie  speculated  upon  foreign 
bills,  so  that  twenty-five  per  cent  was  lost  on  all  the 
money  borrowed  from  France. 

Extravagance  is  the  legitimate  child  of  speculation; 
and,  notwithstanding  the  Puritan  severity  of  the  revolu- 
tionary times,  the  weeds  of  extravagance  rankly  flour- 
ished, not  only  in  the  management  of  public  business,1 
but  in  the  affairs  of  private  life.  Hancock,  as  chief 
magistrate  of  Massachusetts,  led  the  way  in  that  State 
"in  a  series  of  routs,  balls,  and  glittering  re-unions,  en- 
tirely incompatible  with  the  stern  spirit  of  republicanism 
which  had  produced  and  sustained  the  Kevolution." 2 
Franklin  wrote  in  1779,3  "The  extravagant  luxury  of 
our  country,  in  the  midst  of  all  its  distresses,  is  to  me 
amazing.  When  the  difficulties  are  so  great  to  find 
remittances  to  pay  for  the  arms  and  ammunition  neces- 
sary for  our  defence,  I  am  astonished  and  vexed  to  find 
upon  inquiry,  that  much  the  greatest  part  of  the  con- 
gress interest  bills  come  to  pay  for  tea,  and  a  great  part 


1  Letter  of  Robert  Morris,  Dec.  21,  1776,  Dip.  Cor.,  vol.  i.  p.  238. 

2  Wells's  Life  of  S.  Adams,  vol.  iii.  p.  157,  see  Ibid.,  p.  156. 
8  Oct.  4,  Dip.  Cor.,  vol.  iii.  p.  116. 


1775-81.]    SPECULATION,  CORRUPTION,  REPUDIATION.  213 


of  the  remainder  is  ordered  to  be  laid  out  in  gewgaws 
and  superfluities."  What  else  could  be  expected  when 
money  had  become  cheap  and  plentiful,  and  the  old- 
fashioned  ways  of  making  money  slowly  had  been  very 
generally  discarded  for  the  more  exciting,  but  less  healthy 
methods  of  speculation ! 1 

1  Col.  Pickering,  quartermaster-general  of  the  army,  wrote  to  a 
committee  of  Congress  Nov.  22,  1779  :  "I  am  aware  of  the  public  em- 
barrassments on  account  of  the  currency,  and  that  many,  like  ourselves, 
are  suffering  in  the  public  service;  and,  were  public  virtue  generally 
apparent,  as  at  the  beginning  of  the  contest,  we  would  with  pleasure 
devote  our  time  and  all  we  possess  to  the  public  service,  nor  ask  a 
recompense.  But,  while  some  servants  of  the  public  are  amassing 
fortunes,  and  all  ranks  of  people  pursuing,  with  so  much  avidity,  only 
their  private  gain,  we  are  unwilling,  for  their  sakes,  to  reduce  ourselves 
to  beggary."  (Pickering's  Life  of  Pick.,  vol.  i.  p.  245.)  Henry 
Marchant,  a  delegate  from  Rhode  Island,  wrote  to  Gov.  Greene,  "We 
have  scarce  to  fear  but  from  the  inordinate  extravagance  of  the  times, 
a  lawless  thirst  for  riches,  and  a  spirit  of  monopolizing  and  speculation, 
big  with  more  evils  than  all  the  armies  of  Europe  could  afford."  (Aug. 
3,  1778,  Staples's  Hist,  of  R.  I.  in  the  Cont.  Cong.,  p.  192.)  Said  a 
writer  in  a  Boston  paper,  "The  articles  of  rum  and  tea  alone,  which 
are  drank  in  this  country,  would  pay  all  its  taxes."  (Porcupine's 
Works,  vol.  i.  p.  61.)  "The  scarcity  of  money  is  the  only  thing  that 
will  save  this  people.  This  alone  can  produce  industry  and  economy, 
without  which  no  people  can  be  virtuous  and  happy.  This  is  an  uni- 
versal truth,  applicable  to  all  people  in  every  country."  (Extract  from 
Sermon,  Porcupine's  Works,  vol.  i.  p.  65.)  "Speculation  ran  riot. 
Every  form  of  wastefulness  and  extravagance  prevailed  in  town  and 
country,  nowhere  more  than  at  Philadelphia,  under  the  very  eyes  of 
congress;  luxury  of  dress,  luxury  of  equipage,  luxury  of  the  table. 
We  are  told  of  one  entertainment  at  which  eight  hundred  pounds 
were  spent  in  pastry.  As  I  read  the  private  letters  of  those  days,  I 
sometimes  feel  as  a  man  might  feel  if  permitted  to  look  down  upon  a 
foundering  ship  whose  crew  were  preparing  for  death  by  breaking  open 
the  steward's  room  and  drinking  themselves  into  madness.  .  .  .  The 
zeal  which  had  blazed  forth  with  such  energy  at  the  beginning  of  the 


214        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-81. 


Beside  speculation  there  was  a  vast  deal  of  corruption 
growing  out  of  the  use  of  paper  money.  Even  govern- 
ment officials  were  seriously  infected.  The  system  of 
purchasing  encouraged  it.  The  commissaries  of  the  army 
received  a  percentage  upon  the  amounts  expended,  and 
of  course,  the  larger  the  purchases,  the  greater  were  the 
profits.  They  were  not  slow  to  take  advantage  of  the 
system  under  which  they  were  authorized  to  make  pur- 
chases. "  Peculation  and  minor  thieving  were  the  order 
of  the  day.*' 1    Even  Gen.  Arnold  attempted  to  perpe- 

war  was  fast  sinking  to  a  fitful,  smouldering  flame.  Individual  inter- 
ests were  again  taking  the  precedence  of  general  interests.  The  moral 
sense  of  the  people  had  contracted  a  deadly  taint  from  daily  contact 
with  corruption.  The  spirit  of  gambling,  confined  in  the  beginning 
and  lost  to  the  eye,  like  Le  Sage's  Devil,  had  swollen  to  its  full 
proportions,  and,  in  the  garb  of  speculation,  was  undermining  the 
foundations  of  society.  Rogues  were  growing  rich ;  the  honest  men, 
who  were  not  already  poor,  were  daily  growing  poor.  The  laws  that 
had  been  made  in  the  view  of  propping  the  currency,  had  served  only 
to  countenance  unscrupulous  men  in  paying  their  debts  at  a  discount 
ruinous  to  the  creditor.  The  laws  against  forestallers  and  engrossers, 
who,  it  was  currently  believed,  were  leagued  against  both  army  and 
country,  were  powerless,  as  such  laws  always  are.  Even  Washington 
wished  for  a  gallows  as  high  as  Haman's  to  hang  them  on ;  but  the  army 
was  kept  starving  none  the  less." — Greene's  Hist.  View  of  the  Am. 
Bev.,  pp.  160,  164. 

"  The  articles  of  rum  and  tea  alone,  which  are  drank  in  this  country, 
would  pay  all  its  taxes.  But  when  we  add,  sugar,  coffee,  feathers,  and 
the  whole  list  of  bawbles  and  trinkets,  what  an  enormous  expense  ! 
My  countrymen  are  all  grown  very  tasty!  Feathers  and  jordens 
must  all  be  imported!  A  Hampshire  man,  who  drinks  forty  shillings 
worth  of  rum  in  a  year,  and  never  thinks  of  the  expense,  will  raise  a 
mob  to  reduce  the  governor's  salary,  which  does  not  amount  to  three 
pence  a  man  per  annum."  —  NoAn  Webster,  Coll.  of  Essays,  p.  129. 

i  Phillips,  106. 


1775-81.]    SPECULATION,  CORRUPTION,  REPUDIATION.  215 


trate  a  gross  fraud  upon  the  people.  He  had  run  a  long 
career  of  profligate  dissipation  at  Philadelphia,  and  was 
desirous  of  covering  his  deficiencies  by  making  a  claim 
on  the  government.  A  very  slight  inspection  showed 
the  claim  to  be  fraudulent,  and  it  was  disallowed.  The 
affair  produced  a  great  sensation  at  the  time.1 

Henry  Laurens 2  wrote  to  Gov.  Houston  of  Georgia, 
from  Philadelphia,  at  the  time  he  was  presiding  over 
Congress:  "Were  I  to  unfold  to  you  Sir,  scenes  of  venal- 
ity, peculation  and  fraud  which  I  have  discovered,  the 
disclosure  would  astonish  you,  nor  would  you  Sir,  be  less 
astonished  were  I  by  a  detail  which  the  occasion  would 
require  prove  to  you  that  he  must  be  a  pitiful  rogue,  who, 
when  detected,  or  suspected,  meets  not  with  powerful 
advocates  among  those  who  in  the  present  corrupt  time 
ought  to  exert  all  their  powers  in  defence  and  support  of 
these  friend-plundered,  much  chagrined,  and  I  was  almost 
going  to  say,  sinking,  states."  3 

Paper  money  was  indeed  bringing  forth  evil  fruits  in 
great  abundance.  Washington  4  wrote :  "  Speculation,  pec- 
ulation, engrossing,  forestalling,  with  all  concomitants, 
afford  too  many  melancholy  proofs  of  the  decay  of  public 

1  Austin's  Life  of  Gerry,  vol.  i.  pp.  316,  317. 

2  Aug.  27,  1778,  Hist.  Mag.,  vol.  i.  p.  66,  second  series. 

8  See  further  Hamilton,  Hist,  of  Repub.,  vol.  i.  p.  567;  Address  of 
Congress,  1777;  Letter  of  Arthur  Lee,  May  21,  1779;  Dip.  Cor.,  vol.  ii. 
p.  244.  The  frauds  discovered  in  the  medical  department  were  of  a 
peculiarly  distressing  character.  Stores  needed  for  sick  and  wounded 
soldiers  were  sold,  and  the  money  was  retained  by  the  perpetrators  of 
the  fraud.  Two  of  the  chief  officers  in  the  medical  department  were 
implicated  in  these  frauds,  —  Drs.  Morgan  and  Shippen.  See  ante,  p. 
79,  and  Penn.  Packet,  Sept.  19,  1780. 

*  Sparks' s  Washington,  vol.  vi.  p.  210. 


216 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-81. 


virtue.  .  .  .  Nothing,  I  am  convinced,  but  the  deprecia- 
tion of  our  currency,  proceeding  in  a  great  measure  from 
the  foregoing  causes,  aided  by  stock-jobbing  and  party 
dissensions,  has  fed  the  hopes  of  the  enemy." 

Creditors  to  a  very  alarming  extent  swelled  their  ac- 
counts to  obviate  losses  arising  from  depreciation.  The 
Treasury  Board  were  in  constant  collision  with  public 
creditors  who  sought  to  swindle  the  government  in  this 
manner.1 

On  every  hand  it  was  acknowledged  that  from  paper 
emissions  had  flowed  the  most  serious  immoral  conse- 
quences. Says  a  discriminating  writer  in  "The  New- 
Jersey  Journal," 2  "  I  do  not  say  that  the  abundance  of 
money  is  the  only  cause  of  the  decay  of  virtue  or  in- 
crease of  vice,  but  I  say  it  is  a  very  principal  cause,  it 
operates  more  this  way  than  any  other,  yea,  than  all  other 
causes  put  together.  An  abundance  of  money  creates 
idleness,  pride,  dissipation,  avarice,  and  these  co-operate 
with  the  money  in  the  quick  production  of  luxury,  de- 
bauchery, gambling  and  every  species  of  prodigal  extrava- 
gance." 

Webster,  in  one  of  his  essays,  —  having  shown  how 
paper  money  defrauded  the  army  of  their  pay,  discour- 
aged enlistments,  and  promoted  desertions,  rendering  it 
more  difficult  also  to  obtain  supplies,  "because  few  men 
are  fond  of  carrying  the  fruits  of  their  year's  labor  to  the 
army,  to  be  sold  for  a  perishing  medium,  which  every  day 
grows  worse  and  worse,"  —  continues  to  remark,  "  The 
whole  system  is  grounded  in  injustice,  is  contrary  to  the 
first  maxims  of  upright  dealing,  and  corrupts  the  whole 

1  Austin's  Life  of  Gerry,  vol.  i.  p.  316.        2  May  27,  1779. 


1775-81.]    SPECULATION,  CORRUPTION,  REPUDIATION.  217 

course  of  trade  and  commutative  justice,  and  of  course 
will  soon  destroy  all  principles  of  morality  and  honesty 
in  trade,  among  the  people ;  for  here  it  is  to  be  considered, 
that  money  is  not  only  the  instrument  or  means  by  which 
trade  is  carried  on,  but  becomes  a  sort  of  common  meas- 
ure of  the  value  of  all  articles  of  trade ;  and  therefore  I 
should  conceive  it  would  be  as  dangerous  to  adopt  any 
measures  which  would  alter  its  value  and  render  it  fluctu- 
ating, as  to  alter  the.  standard  weights  and  measures,  by 
which  the  quantity  of  goods  sold  in  market  is  usually 
ascertained:  —  as  for  example,  to  shorten  the  standard 
yard,  lessen  the  standard  bushel,  or  diminish  the  stand- 
ard pound  weight,  or  adopt  any  measures  that  tend  to 
this,  and  will  probably  affect  it.  We  can  easily  see  the 
dangerous  consequences." 1 

Having  corrupted  the  morals  of  individuals  everywhere, 
the  insidious  poison  finally  ate  into  the  vitals  of  some 
even  of  the  leaders  of  the  nation,  and  led  them  to  perpe- 
trate the  crowning  scheme  of  dishonesty,  that  of  repudia- 
tion. Washington  was  among  the  first  to  be  beguiled 
by  reasoning  in  this  wise :  "  The  sponge," 2  he  writes  to 
President  Reed,  "  which  you  say  some  gentlemen  have 
talked  of  using,  unless  there  can  be  a  discrimination,  and 
proper  saving  clauses  provided  (and  how  far  this  is 
practicable  I  know  not),  would  be  unjust  and  impolitic 
in  the  extreme.  Perhaps  I  do  not  understand  what 
they  mean  by  using  the  sponge.  If  it  be  to  sink  the 
money  in  the  hands  of  the  holders  of  it,  and  at  their 
loss,  it  cannot  in  my  opinion  stand  justified  upon  any 
principles  of  common  policy,  common  sense,  or  common 

1  Political  Essays,  p.  32.      2  Sparks' s  Washington,  vol.  vi.  p.  331. 


218        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-81. 

honesty.  But  how  far  a  man,  for  instance,  who  had 
possessed  himself  of  twenty  paper  dollars  by  means  of 
one,  or  the  value  of  one,  in  specie,  has  a  just  claim  upon 
the  public  for  more  than  one  of  the  latter  in  redemption, 
and  in  that  ratio  according  to  the  periods  of  depreciation, 
I  leave  to  those,  who  are  better  acquainted  with  the 
nature  of  the  subject,  and  have  more  leisure  than  I 
have,  to  discuss." 

In  this  way  the  Russian  financiers  have  reasoned 
several  times  since  respecting  the  paper  issues  of  their 
government;  and  this  is  precisely  the  ground  taken  by 
Russia  whenever  she  has  redeemed  her  paper  emissions, 
not  at  their  nominal,  but  at  their  market  value,  —  a 
policy  which  is  very  likely  to  be  repeated  with  respect 
to  the  paper  money  now  in  circulation  in  that  empire. 
M.  Horn,  manager  of  "  The  Journal  of  St.  Petersburg," 
said  during  a  spicy  discussion  of  the  subject  at  Paris  in 
September,  1878,  "  Russia  has  at  this  moment  a  circula- 
tion of  twelve  hundred  million  roubles  worth  sixty  per 
cent  of  their  nominal  value,  that  is  to  say,  only  worth 
seven  hundred  and  twenty  millions.  The  depreciation 
has  been  borne ;  everybody  has  been  equally  affected 
by  it.  The  Imperial  Government  must  now  ask  itself, 
whether  there  is  any  thing  better  to  do  than  to  squarely 
accept  the  fact  of  the  depreciation  of  its  paper,  and 
better  still,  to  profit  by  it  as  a  means  of  escaping  the 
bad  predicament  it  is  in,  by  unloading  itself  by  a  stroke 
of  internal  bankruptcy."  An  easy  way  surely  of  escap- 
ing from  debts.  But  the  moral  obligation  to  pay  is  not 
thus  easily  discharged. 

Doubtless  the  mode  of  reasoning  in  which  Washington 


1775-81.]    SPECULATION,  CORRUPTION,  REPUDIATION.  219 


indulged  was  not  in  the  least  peculiar  to  him:  it  was 
the  common  thinking  of  the  day.  The  people,  therefore, 
by  degrees  prepared  themselves  for  repudiation,  which 
finally  came  in  the  Forty-for-one  Act,  the  provisions  of 
which  have  already  been  considered.1 

"Wherever  the  species  is  much  debased,  the  people 
are  so  too,"  said  John  Evelyn 2  nearly  a  century  before, 
the  truth  of  which  saying  was  again  impressively  veri- 
fied. How  long  prior  to  this  Act  of  repudiation  had 
Congress,  in  a  stirring  address  to  the  people,  declared 
that  a  bankrupt,  faithless  republic  would  be  a  novelty 
in  the  political  world,  that  it  would  appear  "  like  a  com- 
mon prostitute  among  chaste  and  respectable  matrons"? 
Yet  within  ninety  days  from  the  time  of  uttering 
these  sentiments,  the  United  States,  by  act  of  Congress, 
became  a  "  common  prostitute,"  and  the  novelty  of  a 
bankrupt  and  faithless  republic  was  exhibited  to  the 
full  blaze  and  glare  of  the  civilized  world.    No  doubt 

1  The  tide  of  speculation,  having  once  set  in,  could  not  easily  be 
turned.  Long  after  the  war  had  closed,  speculation  still  continued. 
"The  country  swarms  with  speculators,"  says  Webster,  "who  are  search- 
ing all  places,  from  the  stores  of  the  wealthy  to  the  recesses  of  indi- 
gence for  opportunities  of  making  lucrative  bargains.  Not  a  tavern 
can  we  enter,  but  we  meet  crowds  of  these  people  who  wear  their 
character  in  their  countenances.  ...  It  is  remarked  by  people  very 
illiterate  and  circumscribed  in  their  observation,  that  there  is  not  now 
the  same  confidence  between  man  and  man,  which  existed  before  the 
war.  It  is  doubtless  true;  this  distrust  of  individuals,  a  general  corrup- 
tion of  manners,  idleness,  and  all  its  train  of  fatal  consequences,  may 
be  resolved  into  two  causes:  The  sudden  flood  of  money  during  the 
late  war,  and  a  constant  fluctuation  of  the  value  of  the  currencies." 
—  Noah  Webster,  Coll  of  Essays,  p.  107. 

2  Discourse  on  Medals,  p.  11,  ed.  1697. 


220        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-81. 

the  pressure  upon  Congress  was  great;  but  no  pressure 
ought  to  have  been  thought  sufficient  to  sink  a  nation 
into  the  mire  of  dishonesty.  Its  faith,  its  promises, 
should  have  been  kept  at  every  hazard ;  their  fulfilment 
should  have  been  prevented  only  by  the  death  of  the 
nation  itself.  The  American  nation  could  have  lived 
and  fulfilled  its  promises,  or  have  obtained,  if  unable  to 
pay,  voluntary  relief  from  them,  had  such  a  concession 
been  necessary.  There  was  enough  patriotism  in  those 
days  to  have  made  almost  any  arrangement  for  the 
suspension  of  payments,  or  to  have  obtained  whatever 
relief  in  the  way  of  postponement  or  acceptance  of  a 
portion  of  the  public  indebtedness  was  required  by  the 
government.  The  repudiation  of  the  debt  was  as  dis- 
honest as  it  was  unnecessary ;  though  it  may  be  said,  in 
slight  extenuation  of  the  course  of  members  of  Con- 
gress, they  perhaps  saw  no  other  way  out  of  the  diffi- 
culties which  so  darkly  surrounded  them.  Had  they 
looked  with  clearer  eyes,  determined  in  no  event  ever 
to  dishonor  the  nation  just  then  emerging  into  life,  they 
would  have  surely  found  a  way ;  for  it  cannot  be  that 
the  paths  of  truth  and  honesty,  if  steadily,  and  if  need 
be  heroically,  followed,  shall  ever  fail  to  lead  men  and 
nations  through  the  forests,  however  dark,  into  the  clear 
spaces  beyond. 


1775.] 


FOREIGN  LOANS. 


221 


CHAPTER  XVII. 

FOREIGN  LOANS. 

When  revolution  grew  to  be  the  inspiring  yet  daring 
thought  of  Congress,  that  body  looked  abroad  for  aid, 
especially  from  France ;  because  she  felt  keenly  the 
disastrous  peace  of  1763  with  Great  Britain,  and  was 
eagerly  waiting  for  an  opportunity  to  wreak  successful 
revenge.  How  closely,  therefore,  did  she  bend  her  ear 
to  hear  every  sound  of  discontent  proceeding  from  the 
English  Colonies  in  America !  and  how  gladly  did  she 
welcome  the  news  of  revolution !  But  the  hour  was 
not  yet  come  when  she  could  openly  espouse  the  cause 
of  Congress  :  nevertheless,  she  secretly  proffered  assist- 
ance. For  several  months,  aid  came  through  a  private 
channel  from  a  person  less  known  in  commerce  than  in 
politics  and  society,  —  the  discreet  yet  enthusiastic  con- 
fidential agent  of  the  French  ministry,  Beaumarchais. 
For  the  more  perfect  concealment  of  his  designs,  the 
business  was  conducted  under  the  name  of  Roderique 
Hortalez  &  Co.  Within  a  few  years  something  has 
been  done  to  rescue  the  history  of  his  well-meant  and 
valuable  efforts  from  oblivion ;  and,  though  the  record  is 
incomplete,  enough  has  been  preserved  to  show  that 
he  was  an  efficient  if  not  always  true  friend  of  the 
republic. 


222        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  1.1775. 


The  two  leading  spirits  in  the  French  cabinet  at  the 
outbreak  of  the  Revolution  were  Turgot,  the  minister  of 
finance,  and  Vergennes,  who  held  the  post  of  secretary 
of  state.  The  former,  from  the  beginning,  was  strenu- 
ously opposed  to  furnishing  any  aid  whereby  the  peace 
between  France  and  Great  Britain  would  be  endangered. 
Doubtless  his  policy  was  the  wisest  for  France,  as  her 
prosperity  was  dependent  on  peace :  war  might  indeed 
increase  her  glory,  and  swell  her  pride,  but  only  at  the 
expense  of  life  and  property,  which  in  Turgot's  eyes  were 
of  far  greater  account.  Vergennes,  though  equally  cool, 
and  withal  a  discreet  minister,  was  not  so  harmoniously 
endowed  by  nature :  he  burned  for  revenge  and  the 
humiliation  of  Great  Britain,  yet  was  content  to  wait 
until  France  could  strike  a  decisive  blow.  The  king's 
feelings  were  akin  to  those  of  Vergennes;  and  so,  while 
he  admired  Turgot  as  much  as  a  person  of  such  inferiority 
is  capable  of  appreciating  a  great  superior,  his  policy  was 
determined  by  the  minister  of  foreign  affairs,  and  Turgot's 
influence  was  lost. 

Negotiations  with  France  on  the  side  of  the  Colonies 
emanated  for  a  long  period  from  a  committee  of  secret 
correspondence,  appointed  by  Congress,1  and  composed  of 
five  members.  In  April,2  1777,  the  name  was  changed 
to  that  of  Committee  of  Foreign  Affairs.  By  this  name 
they  continued  to  transact  the  foreign  affairs  of  the  gov- 
ernment until  the  appointment  of  Robert  R.  Livingston 
as  secretary  of  foreign  affairs,  in  August,3  1781.  Months 
before,  Franklin  had  tried  to  convince  Congress  of  the 
necessity  of  establishing  such  an  office.  While  existing, 
i  Nov.  29,  1775.  »  April  17>  8  Aug.  10. 


1776.] 


FOREIGN  LOANS. 


223 


this  committee,  like  all  committees  of  Congress,  poorly 
performed  their  business:  letters  often  remained  un- 
answered when  prompt  replies  should  have  been  sent; 
and  the  record  of  their  proceedings  was  very  imper- 
fectly kept.  Livingston  introduced  method  in  the  man- 
agement of  the  public  business ;  all  correspondence 
received  prompt  attention :  and  the  records  of  the  ofSco 
were  faithfully  and  intelligently  preserved. 

The  committee  of  secret  correspondence  soon  after 
their  appointment  authorized  Arthur  Lee,  who  was  then 
in  London,  to  ascertain,  if  possible,  the  intentions  of  the 
British  Government,  as  well  as  to  obtain  supplies  for  the 
use  of  Congress  ;  and  early  in  1776  Silas  Deane  was  sent 
by  the  same  authority  to  Paris  as  commercial  and  political 
agent.1  These  two  commissioners  were  successful  in  open- 
.  ing  negotiations  with  Beaumarchais,  with  whom  an  agree- 
ment was  made  for  munitions  of  war  and  other  supplies 
needed  by  the  Colonies.  One  million  livres  were  paid  by 
Vergennes  to  Beaumarchais 2  for  the  benefit  of  the  Amer- 
ican Colonies,  with  which  he  purchased  munitions  of  war 
secretly  from  the  royal  arsenals.  Shortly  afterward3  a 
sum  equally  great  was  sent  by  the  court  of  Spain  to 
Vergennes,  to  be  appropriated  by  him  in  the  same  man- 
ner.4 In  return,  Beaumarchais  expected  to  receive  tile" 
produce  of  the  country,  for  the  importation  of  which  every 

1  For  the  full  history  of  Deane' s  transactions,  see  Report  No.  ,  27th 
Cong.,  second  session. 

2  June  10,  1776;  see  letter  of  Franklin  to  Charles  Thompson,  June 
27,  1787,  Dip.  Cor.,  vol.  iv.  p.  226;  Lyman's  Diplomacy  of  the  U.  S., 
vol.  i.  p.  28,  2d  ed. 

3  Aug.  11,  1776. 

*  Pitkin's  Polit.  and  Civil  Hist,  of  U.  S.,  vol.  i.  p.  411,  ed.  1828. 


22-i        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1776. 


facility  was  to  be  furnished  by  the  French  Government.1 
it  was  confidently  believed  that  this  system  would  prove 
mutually  advantageous ;  though  the  French  Government 
prudently  reserved  the  right  to  modify  or  suspend  the 
plan,  if  such  a  step  became  necessary.2 

The  plan  worked  well  in  the  beginning ;  but  ere  long 
the  rumor  reached  America  that  Deane  and  Beaumarchais 
were  jointly  engaged  in  swindling  the  American  Govern- 
ment by  receiving  cargoes  from  that  country,  and  by 
sending  munitions  which  were  the  gift  of  the  king  as 
the  property  of  Beaumarchais.  The  effect  of  this  rumor 
was  to  delay  the  shipment  of  cargoes,  and  finally  none 
were  despatched  in  payment  of  the  materials  thus  fur- 
nished. Vergennes,  fearing  that  the  British  Government 
might  learn  of  the  transaction,  denied  to  the  committee 
of  secret  correspondence  all  participation  therein  on  the 
part  of  the  French  Government,  and  admitted  no  more 
than  that  Beaumarchais  had  been  allowed  to  make  some 
of  his  purchases  at  the  royal  arsenals.  It  is  unquestion-S 
ably  true  that  the  French  Government  did  secretly  i , 
advance  to  Beaumarchais  another  million  of  livres,  beside 
the  two  millions  previously  mentioned,  to  be  used  for  the-/ 
benefit  of  America.  Subsequently,  when  he  sought  to 
effect  a  settlement  with  Congress  he  did  not  present  an 
honest  statement  of  the  advances  by  the  French  Govern- 
ment. Congress,  however,  partly  from  the  belief,  mo 
doubt,  that  Beaumarchais  meant  to  perpetrate  a  fraud 

1  Pitkin  says  the  French  court  did  not  expect  to  receive  any  produce 
in  return  for  the  money:  the  main  object  of  this  stipulation  was  to  cover 
up  the  transaction,  and  make  it  look  like  a  mercantile  affair.  Ibid.,  vol.  i. 
p.  403. 

2  North  Am.  Rev.,  vol.  lxxxiv.  p.  137. 


1776.] 


FOREIGN  LOANS. 


225 


on  the  country,  and  partly  from  want  of  means  to  pay 
him,  delayed  making  a  settlement  for  many  years.  He 
visited  this  country  in  the  hope  of  inducing  Congress  to 
consider  his  claim,  and  pay  him  what  was  due ;  but  the 
matter  was  kept  open  until  1831,  when  Congress  finally 
paid  to  his  heirs,  under  the  convention  with  the  King  of 
the  French  of  July  4,  1831,  810,000  livres.  Bayjey,  who 
has_  examined  the  matter  in  a  thorough  and  dispassionate 
manner,  declares  that  the  Government  of  the  United 
States  overpaid  the  claim  to  the  amount  of  1,426,787_ 
livres.1 

Deane  arrived  in  France  in  June,  1776,  and  two 
months  2  afterward  gave  a  lengthy  account  of  his  efforts 
to  obtain  aid  for  his  government.  One  of  the  persons 
desirous  of  furnishing  arms,  powder,  and  other  war 
material,  was  M.  Penet,  who  had  collected  these  stores  in 
fulfilment  of  a  contract  made  with  the  committee  of 
secret  correspondence.3  Deane  urged  him  to  send  the 
supplies  forward,  and  told  him  that  he  would  certify  to 
the  merchants  from  whom  the  purchases  had  been  made, 
"that  the  Congress  would  pay  for  whatever  stores  they 
would  credit  them  with,  and  in  the  mean  time  advised 
him  to  proceed  strictly  agreeable  to  the  letter  of  the  con- 

1  See  John  Bigelow's  article  on  Beaumarchais,  Honrs  at  Home,  vol. 
xi.  p.  160;  American  State  Papers  by  Lowrie  and  Clarke,  Claims,  p. 
423;  North  Am.  Rev.,  vol.  lxxxiv.  pp.  134-139;  Pitkin's  Polit.  and  Civil 
Hist,  of  U.  S.,  vol.  i.  p.  402,  et  seq.  The  claim  of  Beaumarchais  was 
presented  to  Congress  several  times,  and  on  one  occasion  especially  an 
elaborate  report  was  made  thereon.  March  15,  1814,  State  Papers,  13th 
Cong.,  second  session,  vol.  ii.  p.  84;  see  report  also  of  March  23,  1812 
Reports,  &c,  12th  Cong.,  first  session,  vol.  ii. 

2  Aug.  18,  1776,  Dip.  Cor.,  vol.  i.  p.  9.  8  Ibid.,  p.  10. 


! 


226        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1776. 


tract,"  as  he  was  "  positive  that  the  Congress  would  fulfil 
their  part  of  it,"  1  whereupon  he  departed  for  Nantes,  to 
ship  the  goods  the  next  day.  This  transaction  well  repre- 
sents Deane's  loose  method  of  doing  business ;  for  under 
cover  of  the  authority  granted  him,  there  was  no  limit 
to  the  frauds  which  Penet  might  have  perpetrated  on  the 
American  Government.  Nor  was  it  long  before  Deane 
found  his  accounts  in  such  confusion  that  he  was  never 
able  to  explain  them  satisfactorily  to  Congress.  From 
M^hft/nrnftn^  Deane  obtained  a  credit  for  the  Colonies 
V  to  the  amount  of  one  million  livres  ; "  and  in  the  letter 
containing  this  announcement,  he  added  that  he  had  "  in 
treaty  another  credit,"  which,  with  the  other,  would  be 
sufficient  to  purchase  the  things  mentioned  in  his  letter 
of  instructions.  This  credit  was  to  run  until  the  next 
May,  before  which  time  he  hoped  to  receive  remittances.2 
Notwithstanding  these  credits,  and  his  assertions  respect- 
ing funds  to  complete  his  purchases,  he  asks  the  com- 
mittee of  secret  correspondence  to  consider  his  situation, 
44  with  only  6,000  or  7,000  pounds  to  complete  a  contract 
of  forty,"  while  bills  for  his  private  expenses  had  been 
protested.3  Thus  Deane,  in  the  beginning  of  his  repre- 
sentative career,  was  a  poor  proof  of  the  financial  ability 
of  his  countrymen.  Subsequently  he  obtained  a  quantity 
of  stores ; 4  and  in  September  he  wrote  to  Robert  Morris, 
who  was  then  serving  as  one  of  the  members  of  the  com- 

1  Dip.  Cor.,  vol.  i.  p.  11.  2  Ibid.,  p.  21.  8  Ibid.,  p.  21. 

4  From  the  outset  Congress  was  very  slow  in  sending  any  thing  to 
Deane  with  which  he  could  liquidate  his  purchases.  In  October,  1776, 
he  writes  that  the  3ilence  of  Congress  "well  nigh  distracts"  him,  and 
that  whatever  the  cause  might  be,  it  had  "greatly  prejudiced  the  affairs 
of  the  United  Colonies  of  America." 


1777.] 


FOREIGN  LOANS. 


227 


mittee  of  secret  correspondence,  of  receiving  the  promise 
of  supplies  of  clothing  in  October  for  thirty  thousand 
men,  beside  a  large  quantity  of  ammunition,  which  was 
to  come  from  the  royal  arsenals.1  At  that  time  the  debt 
which  the  Colonies  were  likely  to  incur  by  carrying  on 
the  war  was  a  common  topic  among  ministerial  writers ; 
but  Deane  was  certain,  that,  if  American  liberties  were 
established,  the  demand  for  land  in  America  would  more 
than  compensate  for  the  whole  expense  of  the  struggle. 
The  people  of  France  were  eager  for  news  from  the  revo- 
lutionary Colonies ;  and  Deane  was  prosecuting  his  cause 
with  great  zeal,  even  if  not  according  to  knowledge. 
"  Surely,"  he  says  to  the  committee,  "  you  will  put  me 
down  as  one  of  the  first  in  the  roll  of  American  heroes, 
when  you  consider  my  situation,  plunging  into  very  im- 
portant engagements,  which  I  can  by  no  means  avoid, 
yet  without  funds  to  support  them." 2  He  adds,'  that  he 
had  met  with  every  possible  encouragement  from  every 
person  he  had  seen,  whether  in  or  out  of  office,  —  a  re- 
mark showing  very  clearly  the  drift  of  public  sentiment 
in  Paris  regarding  the  contest  between  Great  Britain  and 
America.3 

After  independence  was  declared,  Deane  was  appointed 
one  of  the  three  commissioners  (the  other  two  were  Dr. 
Franklin  and  Arthur  Lee)  to  negotiate  treaties,  and  pro- 
cure assistance  from  the  nations  of  Europe.  Early  the 
next  year 4  they  applied  to  Vergennes  for  ships,  men,  and 

1  Sept.  17,  1776,  Dip.  Cor.,  vol.  i.  p.  40. 

2  Aug.  15,  1776,  Ibid.,  p.  33;  Letter  to  John  Jay,  Dec.  3,  1786, 
Ibid.,  p.  91. 

8  See  Letter  of  Commissioners,  Jan.  17,  1777,  Ibid.,  p.  253. 
4  Jan.  5,  1777,  Ibid.,  vol.  ii.  p.  21. 


228 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1777. 


munitions  of  war ;  but  this  application  was  refused. 
France  was  not  yet  ready  to  engage  in  the  contest,  and, 
of  course,  granting  such  aid  would  have  been  construed 
as  an  act  of  war.  They  had  been  directed  also  to  pro- 
cure a  loan  of  two  million  pounds  (a  suggestion  emanat- 
ing from  Deane),  in  the  effort  to  obtain  which  they  were 
partly  successful.  Money  could  be  furnished  without  the 
knowledge  of  Great  Britain:  war-ships  could  not  be. 
At  first  it  was  proposed  to  obtain  money  from  the 
farmers-general,  to  be  repaid  in  tobacco,  of  which  they 
wanted  a  large  quantity.  As  it  was  difficult  to  settle  all 
the  terms,  the  Crown  granted  two  million  livres,  of  which 
sum  one-quarter  was  paid  in  advance,  and  the  balance  in 
three  payments  of  equal  amount,  in  April,  July,  and 
.October.  The  king  exacted  no  promise  of  repayment, 
but  required  absolute  silence  respecting  the  transaction.1 

Though  this  sum  was  only  a  small  portion  of  what 
they  were  directed  to  borrow,  the  commissioners  wrote 
hopefully  concerning  their  ability  to  raise  enough  money 
to  pay  the  interest  upon  twenty  million  dollars  of  paper 
money  which  Congress  had  issued,  and  might  be  obliged 
to  borrow,  in  order  to  preserve  the  credit  of  all  the  Conti- 
nental emissions.  They  also  offered  the  suggestion,  that, 
on  "great  or  urgent  occasions,"  Congress  might  venture 
to  borrow  even  more,  as  they  conceived  it  were  better 
to  do  this  than  to  pay  interest  on  two  millions  sterling  to 
foreigners.2  They  advised  Congress  to  draw  on  them, 
for  "  sums  equal  to  the  interest  of  what  they  have  bor- 
rowed,  as  that  interest  becomes  due,"  allowing  the 

1  March  12,  1777,  Dip.  Cor.,  vol.  i.  pp.  272,  273. 

2  April  9,  1777,  Ibid.,  p.  276. 

es  « 


1777.] 


FOREIGN  LOANS. 


229 


lenders,  in  the  drafts,  "  five  livres,  money  of  France, 
for  every  dollar  of  interest ; "  which  advice  was  speedily 
and  gladly  followed.  They  also  ventured  to  make  the 
same  promise  respecting  future  loans,  without,  however, 
mentioning  the  grounds  of  their  expectation.  Never 
relaxing  their  efforts  to  borrow  money,  they  were  com- 
pelled to  write,  about  the  time  the  last  payment  on  the 
two  million  French  loan  was  made,  that  they  saw  no 
probability  of  obtaining  another  loan  of  two  millions 
sterling  from  any  money-holder  in  Europe  until  affairs 
in  America  were  in  foreign  opinion  more  firmly  estab- 
lished.1 Nevertheless,  the  commissioners  did  succeed,, 
before  the  year  closed,  in  getting  a  second  loan  of  three 
million  livres  from  France,  seventy  thousand  pounds  of 
which  were  remitted  in  December.2 

This  loan  was  paid  in  quarterly  instalments ;  and,  when 
the  last  instalment  had  been  received,  the  commissioners 
applied  once  more  to  Vergennes  for  money.3  They  regret- 
ted the  necessity  of  asking  for  further  assistance ;  but  as 
the  war  had  proved  very  expensive,  and  emissions  of 
paper  money  had  become  indispensable,  in  order  to  pre- 

1  Oct.  7,  1777,  Dip.  Cor.,  vol.  i.  p.  335. 

2  Dec.  18,  1777,  Ibid.,  pp.  357,  358.  When  the  Act  of  Sept.  10,  1777, 
was  passed,  relating  to  the  drawing  of  bills  of  exchange  on  France, 
Almon,  in  his  Remembrancer,  added  the  remark,  "  It  has  long  been 
notorious,  that  the  courts  of  France  and  Spain  have  supplied  the 
Colonies,  with  arms,  ammunition,  artillery,  clothing,  &c.  The  above 
extraordinary  resolution  of  Congress,  demonstrates,  that  the  Colonies 
are  subsidize!  by  these  courts;  and  that  being  thus  secure  of  having  the 
interest  of  their  public  debt  discharged  in  Europe,  they  can  want  no 
other  assistance  for  the  establishment  of  their  independency,  and  the 
solidity  of  their  national  credit."    1777,  p.  486. 

3  Aug.  28,  1778,  Ibid.,  p.  429. 


230        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 


vent  their  depreciation,  Congress  had  borrowed  large 
quantities  of  this  paper,  and  had  promised  the  lenders 
that  interest  thereon  would  be  paid  out  of  European 
funds;  and,  consequently,  the  commissioners  were  ex- 
pecting to  hear  of  the  arrival  of  vessels  from  America, 
bringing  bills  of  exchange  for  the  interest  which  was 
then  due,  and  amounting  to  a  large  sum.  They  therefore 
hoped  that  the  quarterly  payment  of  seven  hundred  and 
fifty  thousand  livres  might  be  continued ;  and  Vergennes 
was  assured,  that,  as  soon  as  Congress  could  find  other 
ways  of  answering  their  demands,  they  would  not  tres- 
pass upon  the  goodness  of  the  French  court.1 

The  commissioners  also  sought  for  permission  to  borrow 
two  millions  sterling  in  France,  which  was  to  be  applied 
in  redeeming  bills  of  credit  until  their  original  value  was 
restored.2  The  commissioners  were  anxious  to  restore? 
American  credit  in  Europe,  which  had  been  impaired 
by  excessive  issues  of  paper  money ,  and  the  restoration 
could  be  effected  in  no  other  way  than  by  retiring  the 
excess  of  those  issues.  This  loan  of  two  millions  ster- 
ling, therefore,  was  not  asked  of  the  French  Government. 
What  the  commissioners  desired  was  permission  to  bor- 
row any  part  of  the  sum  in  France  when  they  found 
opportunity.  As  they  would  be  competitors  with  the 
king  in  the  money-market,  and  perhaps  would  have  an 
advantage  over  him  by  offering  higher  rates,  they  were 
politic  enough  to  request  him,  if  he  found  fault  with  the 
measure,  to  fix  the  rate  of  interest  himself.  This  per- 
mission to  borrow  money  in  the  French  Dominions  a 
.month  later  was  declined,  and  then  the  application  for  a  j 

1  Dip.  Cor.,  vol.  i.  pp.  429,  430.  3  Ibid.,  p.  430.  a 


1778.] 


FOREIGN  LOANS. 


231 


quarterly  payment  of  three-quarters  of  a  million  livres 
from  the  French  Government  was  renewed.1  Beside  the 
poor  credit  of  the  newly  created  republic  in  Europe, 
which  prevented  it  from  obtaining  assistance,  the  prin- 
cipal European  nations  were  arming  for  war,  and  all 
were  borrowing  money,  while  some  of  them  offered  much 
higher  rates  of  interest  than  America.  On  the  17th  of 
September2  the  commissioners  wrote  that  "France,  Eng- 
land, the  Emperor,  Spain,  Russia,  at  least,  are  borrowing 
money,  and  there  is  not  one  of  them  that  we  can  learn, 
but  offers  better  interest  than  the  United  States  have 
offered.3  There  can  be  no  motive  then  but  simple  benev- 
olence to  lend  us."  So  long  as  this  condition  of  affairs 
existed,  there  was  no  hope  of  getting  funds  from  individ- 
uals: these  must  come  from  governments,  if  at  all, 
inspired  either  by  benevolence,  or  by  the  desire  to  humili- 
ate the  British  crown. 

Nor  were  these  the  only  causes  affecting  American 
credit.  Deane,  whose  rash  ways  of  doing  business  could 
not  escape  notice  and  unfavorable  comment,  had  con- 
tinued to  make  purchases  in  the  most  careless  manner, 
until  his  accounts  were  in  inextricable  confusion ;  while 
the  creditors  of  the  government  continually  pressed  him 
for  a  settlement.  John  Adams  and  Arthur  Lee,  by  order 
of  the  government,  went  through  a  "  tedious  examination  " 
of  them,  but  without  satisfaction.  "  All  that  we  can  find 
is,"  Lee  wrote,  "  that  millions  have  been  expended,  and 
almost  every  thing  remains  to  be  paid  for.  Bargains 

1  Sept.  17,  1778,  Dip.  Cor.,  vol.  i.  p.  445.  2  Ibid.,  p.  446. 

3  The  same  condition  of  the  European  money-market  remained  for 
a  long  period.    See  Ibid.,  vol.  ii.  p.  182. 


232        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 


have  been  made  of  the  most  extravagant  kind.  For 
example,  the  uniforms  that  are  agreed  for  at  thirty- 
seven  livres  might  have  been  had  here  for  thirty-two 
livres  each,  and  equally  good,  which,  being  five  livres  in 
every  suit  too  much,  comes  to  a  large  sum  upon  thou- 
sands."1 Numerous  irregularities  were  found,  amount- 
ing to  a  large  sum,  and  these  things  seriously  affected 
the  credit  of  the  country.  Deane  afterward  sought  to 
satisfy  Congress  that  he  was  guilty  of  no  dishonesty  or 
impropriety  in  his  purchases ;  but  he  failed  to  convince 
that  body  of  the  regularity  of  his  transactions.  No  evi- 
dence has  ever  come  to  light  of  Deane's  dishonesty ; 2  but 

1  June  1,  1778,  Dip.  Cor.,  vol.  ii.  p.  163.  Lee's  account  was  colored 
by  his  dislike  of  Deane.  In  the  letter  from  which  the  above  extract  is 
taken,  he  says  that  the  contracts  were  concealed  from  him  "with  the 
utmost  care,  as  was  every  other  means  of  my  knowing  how  these  affairs 
were  conducted;  and  as  both  my  colleagues  concurred  in  this  conceal- 
ment, and  in  refusing  my  repeated  requests  to  make  up  accounts  and 
transmit  them  to  Congress,  it  was  not  in  my  power  to  know  with  accu- 
racy, much  less  to  prevent,  this  system  of  profusion.  I  was  told  that 
Mr.  Williams,  to  whom  I  knew  the  public  money  was  largely  intrusted, 
was  to  furnish  his  account  monthly,  but  they  were  never  shown  me ;  and 
it  now  appears  that  for  the  expenditure  of  a  million  of  livres  he  has 
given  no  account  as  yet,  nor  can  we  learn  how  far  what  he  has  shipped 
is  on  the  public,  how  far  on  private,  account." 

2  Deane's  conduct  gave  rise  to  much  heated  discussion  at  the  time; 
nor  are  writers  yet  perfectly  agreed  concerning  the  light  in  which  his 
transactions  are  to  be  regarded.  To  us,  both  Lee  and  Deane  appear  to 
have  been  honest  men,  and  exceedingly  ambitious  to  serve  their  coun- 
try; while  each  in  obtaining  aid  for  America  was  jealous  of  the  success 
of  the  other.  Moreover,  Lee's  hatred  of  Deane  undoubtedly  arose, 
in  part,  from  the  fact  that  the  latter  was  a  Connecticut  schoolmaster, 
while  the  former  belonged  to  the  high  bloods  of  Virginia.  Deane  had 
Strong  enemies  and  friends:  among  the  latter  was  Robert  Morris,  who,  in 


1778.] 


FOREIGN  LOANS. 


233 


that  h.3  did  conduct  the  public  business  in  a  reckless  and 
wasteful  manner,  thereby  injuring  the  public  credit,  can- 
not be  questioned. 

When  the  commissioners  assured  Congress  of  their 
ability  to  pay  the  interest  upon  the  sums  borrowed  at 
home,  they  "  did  not  dream  "  of  Congress  drawing  upon 
them  for  other  purposes.  Yet  in  a  short  time  they  paid 
drafts  to  returned  officers  to  the  amount  of  82,211  livres, 
and  feared  the  receipt  of  many  more  orders  of  the  same 
kind.  Mr.  Bingham,  one  of  the  members  of  the  commit- 
tee of  secret  correspondence,  sent  drafts  for  a  hundred 
thousand  livres  more.  "  This  has  among  other  things," 
wrote  Franklin,  "  made  me  quite  sick  of  my  Gibeonite 
office, — that  of  drawing  water  for  the  whole  congrega- 
tion of  Israel.  But  I  am  happy  to  learn  from  our  minister 
of  finance,  that  after  the  end  of  March  next  no  further 

turn,  was  assailed,  for  defending  Deane,  by  Thomas  Paine  with  no  little 
severity.  See  letters  of  Deane,  November,  1778,  Almon's  Eememb., 
for  Year  1778  and  beginning  of  1779,  p.  185,  and  from  Robert  Treat 
Paine,  Thomas  Paine,  Robert  Morris,  and  other  persons,  Ibid.,  pp.  369- 
390;  also  Lee's  Letter,  April  5,  1778,  Dip.  Cor.,  vol.  ii.  p.  150;  and 
especially  Wells's  Life  of  S.  Adams,  vol.  iii.  pp.  60-63;  Deane's  Reply  to 
Lee's  Letter  of  June  1,  1778,  Dip.  Cor.,  vol.  ii.  p.  162,  Oct.  12,  1778, 
Dip.  Cor.,  vol.  i.  p.  139.  Franklin  entertained  a  good  opinion  of 
Deane,  March  31,  1778,  Dip.  Cor.,  vol.  i.  p.  120;  July  22,  1778,  Ibid., 
vol.  iii.  p.  52.  Oct.  17,  1779,  Franklin  wrote  to  James  Sewell,  "I  had 
and  have  still  a  very  good  opinion  of  Mr.  Deane,  for  his  zeal  and 
activity  in  the  service  of  his  country;  I  also  thought  him  a  man  of 
integrity.  ...  As  yet,  I  think  him  innocent"  (Dip.  Cor.,  vol.  iii.  p. 
120).  Campbell  in  his  History  of  Virginia,  while  strongly  taking  the 
side  of  Lee,  says  with  reference  to  Deane,  "  He  certainly  rendered  the 
Colonies  great  service  at  one  time,  and  found  a  strong  party  in  Congress 
in  his  support,  including  men  of  both  sections  and  high  character." 
P.  703. 


234        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779, 

drafts  shall  be  made  on  me,  or  trouble  given  •  me  by 
drafts  on  others."  Well  might  Franklin  and  his  col- 
leagues write,  "  If  you  reduce  us  to  bankruptcy  here,  by 
a  non-payment  of  your  drafts,  consider  the  consequences." 
The  following  advice  of  Franklin  was  certainly  sound: 
"  In  my  humble  opinion,  no  drafts  should  be  made  on  us 
without  first  learning  from  us  that  we  shall  be  able  to 
answer  them."  1 

When  the  three  million  loan  was  filled,  Franklin  de- 
sired the  king  to  continue  to  make  his  quarterly  payments 
of  seven  hundred  and  fifty  thousand  livres ;  and  Gerard 
announced,  on  the  9th  of  February,  that  the  king  had 
*  consented  to  advance  seven  hundred  and  fifty  thousand 
livres  more.2 

Congress  continued  to  draw  bills  of  exchange  upon 
the  commissioners,  which  were  accepted  and  paid  so  long 
as  they  were  in  possession  of  any  funds  belonging  to  the 
government.  But  they  suffered  "  the  utmost  anxiety," 
so  they  wrote,  ulest  we  should  be  obliged  to  protest 
bills."  3  They  had  done  every  thing  within  their  power 
to  obtain  money  for  Congress ;  but  their  efforts  had  been 
only  partially  successful.  They  now  begged  for  supplies 
from  home,  and  were  unable  to  send  the  arms,  ammuni- 
tion, and  clothing  which  Congress  had  ordered,  because 
they  had  no  funds  to  pay  for  them. 

Franklin  never  wearied  in  his  efforts  to  obtain  assist- 
ance for  his  country,  when  the  prospect  of  success  would 
have  disheartened  a  less  patient  and  courageous  soul.  In 

1  July  22,  1778,  Dip.  Cor.,  vol.  iii.  p.  58. 

2  Feb.  9,  1779,  Ibid.,  vol.  x.  p.  208. 
8  Nov.  7,  1778,  Ibid.,  vol.  i.  p.  492. 


1779.] 


FOREIGN  LOANS. 


235 


various  ways  and  through  different  channels  did  he  lay 
before  the  ministry  "the  distressed  state  of  our  finances 
in  America."  All  seemed  to  be  willing  to  help,  except 
the  comptroller,  Neckar,  who,  Franklin  affirmed,1  was  sup- 
posed to  embarrass  every  measure  containing  grants  of 
money.  The  king  was  favorably  disposed ;  for  he  prom- 
ised to  be  security  for  the  payment  of  interest  upon 
three  million  livres,  if  such  a  loan  could  be  obtained  in 
Holland.  Meantime,  the  loan  obtained  at  home,  the 
interest  upon  which  the  commissioners  expected  to  pay, 
had  been  increased  beyond  the  original  sum  of  twenty 
million  dollars;  while  they  were  drained  in  other  ways 
by  Congress.  Moreover,  the  cargoes  sent  over  to  re- 
imburse a  portion  of  the  advances  made  by  Beaumarchais 
and  others  had  met  with  a  poor  fate,  as  some  of  them 
were  "  run  away  with  by  the  seamen,"  or  were  taken  by 
the  enemy,  or,  on  arrival,  had  been  applied  toward  the 
payment  of  debts,  —  the  tobacco  to  the  farmers-general, 
in  fulfilment  of  the  contract  made  with  them ;  and  the 
rice  and  indigo  to  Beaumarchais,  in  part  payment  of  the 
advance  received  from  him.2 

Through  two  eminent  houses  in  Amsterdam,  Franklin 
attempted  to  negotiate  a  loan  with  the  French  king's 
promise  of  payment.  The  great  demand  for  money  by 
Germany  and  England  raised  the  rate  of  interest  above 
what  Franklin  was  authorized  to  offer ;  and  this  circum- 
stance, coupled  with  the  success  of  the  British  arms  in 
destroying  French  trade,  with  the  reported  divisions  in 
Congress  (which  were  greatly  magnified  by  the  British 

1  May  26,  1779,  Dip.  Cor.,  vol.  iii.  p.  85. 

2  May  26,  1779,  Ibid.,  p.  86. 


236        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 


Government),  and  the  pressure  of  several  of  the  Ameri- 
can States  for  separate  loans,  created  a  doubt  among 
the  Dutch  bankers  of  the  ability  of  America  to  repay 
loans  if  they  were  made.  The  applications  of  separate 
States  were,  indeed,  serious  obstacles  in  the  way  of  pro- 
curing assistance  for  che  General  Government.  This  was 
especially  true  in  those  cases  in  which  the  agents  were 
empowered  to  offer  higher  rates  of  interest,  or  were  pos- 
sessed with  unlimited  powers.1  Notwithstanding  the  evil 
effects  of  the  practice  of  the  States,  they  did  not  cease 
from  "running  all  over  Europe,  asking  to  borrow  mon- 
ey," 2  which  shadowed  forth  such  a  belief  in  the  distress 
and  poverty  of  the  country,  as  to  render  all  foreigners 
afraid  to  incur  deeper  obligations  for  the  benefit  of 
America.3 

But  there  was  one  individual  who  dared  come  forward 
and  offer  a  loan  to  the  downcast  and  well-nigh  bankrupt 
republic.  M.  Neufville  was  a  banker  whose  ambition 
and  pretensions  far  exceeded  his  capacity  for  executing 
the  great  plans  he  so  glibly  proposed.  Neufville  is  the 
type  of  a  numerous  class  who  have  flourished  in  the 
financial  world  during  the  last  twenty  years :  indeed, 
probably  some  of  them  are  always  to  be  found  in  every 
country.  Let  us  hear  Dr.  Franklin  tell  the  story  of  his 
intercourse  with  this  pretentious  banker :  — 

"  A  Mr.  Neufville 4  came  from  thence  to  me  last  spring, 

1  May  26,  1779,  Dip.  Cor.,  vol.  iii.  p.  91. 

2  May  31,  1779,  Ibid.,  p.  144. 

8  See  Letter  of  John  Trumbull,  agent  for  Connecticut,  July  20,  1781, 
Trumbull's  Autobiography,  p.  336. 

4  This  man  must  not  be  confounded  with  the  Neufville  with  whom 
Adams  transacted  business.  —  LymaVs  Diplomacy,  vol.  i.  p.  74,  2d  ed. 


1779.] 


FOREIGN  LOANS. 


237 


proposing  to  procure  great  sums,  if  he  might  be  employed 
for  that  purpose,  and  the  business  taken  away  from  the 
house  that  had  commenced  it.  His  terms  at  first  were 
very  extravagant,  such  as  that  all  the  estates  real  and 
personal  in  the  thirteen  Provinces  should  be  mortgaged  to 
him ;  that  a  fifth  part  of  the  capital  sum  borrowed  should 
every  year,  for  five  years,  be  laid  out  in  commodities,  and 
sent  to  Holland,  consigned  to  him,  to  remain  in  his  hands 
till  the  term  (ten  years)  stipulated  for  final  payment  was 
completed,  as  a  security  for  the  punctuality  of  it,  when 
he  was  to  draw  the  usual  commissions ;  that  all  vessels 
or  merchandise  coming  from  America  to  Europe  should 
be  consigned  to  him  or  his  correspondents,  &c.  As  I 
rejected  these  with  some  indignation,  he  came  down  to 
the  more  reasonable  one  of  doing  the  business  as  it 
was  done  by  the  other  house,  who,  he  said,  could  do 
no  more,  being  destitute  of  the  interest  which  he  pos- 
sessed. 

"  I  did  not  care  abruptly  to  change  a  house  that  had 
in  other  respects  been  very  friendly  and  serviceable  to 
us,  and  thereby  throw  a  slur  upon  their  credit,  without  a 
certainty  of  mending  our  affairs  by  it,  and  therefore  told 
Mr.  Neufville,  that  if  he  could  procure  and  show  me  a  list 
of  subscribers,  amounting  to  the  sum  he  mentioned,  or 
near  it,  I  would  comply  with  his  proposition.  This  he 
readily  and  confidently  undertook  to  do.  But  after  three 
months,  during  which  he  acquainted  me  from  time  to 
time  that  the  favorable  moment  was  not  yet  come,  I  re- 
ceived, instead  of  the  subscription,  a  new  set  of  proposi- 
tions, among  the  terms  of  which  were  an  additional  one 
per  cent,  and  a  patent  from  Congress,  appointing  him  and 


238        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1779. 

his  sons1  Commissioners  for  Trade  and  Navigation,  and 
Treasurers  of  the  General  Congress  and  of  every  private 
State  of  the  thirteen  United  States  of  North  America, 
through  the  seven  United  Provinces,1  with  other  extrava- 
gances, which  I  mention,  that  it  may  be  understood  why 
I  have  dropped  a  correspondence  on  this  subject  with  a 
man  who  seemed  to  me  a  vain  promiser,  extremely  self- 
interested,  and  aiming  chiefly  to  make  an  appearance 
without  solidity,  and  who,  I  understand,  intends  applying 
directly  to  Congress,  some  of  his  friends  censuring  me  as 
neglecting  the  public  interest  in  not  coming  into  his 
measures." 1 

Franklin  had  indeed  no  expectation  of  raising  funds  in 
Holland ;  since  the  interest  paid  by  other  nations  was  so 
much  higher,  while  their  credit  was  better  than  that  of 
America.  The  American  States  also,  by  offering  a  more 
generous  rate  of  interest  than  Congress,  impaired  the 
credit  of  the  General  Government.  "My  sole  depend- 
ence," says  Franklin,  "now  is  upon  this  Court:  I  think 
reasonable  assistance  may  be  obtained  here ;  but  I  wish  I 
may  not  be  obliged  to  fatigue  it  too  much  with  my  appli- 
cations, lest  it  should  grow  tired  of  the  connection."  2 

Unlike  Deane,  Franklin  kept  an  intelligent  account  of 
his  expenditures,  and  informed  Congress  from  time  to 
time  what  disposition  was  made  of  the  money  received 
from  the  French  Government.  Thus  far  he  had  succeeded 
in  honoring  all  the  drafts  sent  by  order  of  Congress, 
though  he  was  living  in  constant  apprehension  of  fail- 
ure to  meet  all  of  them.    Bingham  complained  because 

1  Oct.  4,  1779,  Dip.  Cor.,  vol.  iii.  p.  100. 

2  Oct.  4,  1779,  Ibid.,  p.  111. 


1779.] 


FOREIGN  LOANS. 


239 


Franklin  had  refused  to  accept  some  of  his  drafts,  as  very 
hurtful  to  his  credit ;  but  he  acknowledged  that  he  had  no 
authority  from  Congress  to  draw  them ;  while  Franklin's 
defence  was  unassailable,  that  he  never  undertook  to  pro- 
vide for  more  than  the  payment  of  interest  upon  the  first 
loan  authorized  by  Congress.  He  declares,  that  if  all  the 
agents  of  Congress  were  permitted  to  run  in  debt,  and 
draw  upon  him  to  support  their  credit,  he  would  be 
utterly  unable  to  fulfil  their  demands.  Surely  he  could 
not  pay  drafts  exceeding  the  amount  he  was  able  to  raise 
by  loans  from  France  and  other  foreign  countries.1 

Congress  still  cherished  the  hope  of  obtaining  another 
foreign  loan.  But  Lee  wrote2  that  there  was  not  the  least 
possibility,  in  the  present  situation  of  things,  of  getting 
any  adequate  loan  in  Europe ;  and  he  besought  Congress 
not  to  let  the  vain  expectation  of  obtaining  one  divert 
their  attention  from  deriving  aid  from  every  resource  at 
home.  He  continues,  "  It  is  necessary  that  the  impres- 
sions to  our  discredit,  which  have  arisen  from  the  unsuc- 
cessful attempts  that  have  been  already  made,  should  be 
allowed  to  wear  off,  and  some  favorable  event  occur,  such 
as  the  enemy  being  obliged  to  draw  off  their  troops,  be- 
fore it  will  be  possible  to  succeed  in  such  a  plan.  In  the 
mean  time,  the  repetition  of  ineffectual  attempts  will  only 
debase  your  credit  more,  and  especially,  if  they  are  ac- 
companied with  the  offer  of  more  than  ordinary  interest, 
which  ever  augments  the  suspicion  of  the  insecurity  of 
the  principal,  and  that  the  borrowers  are  themselves  con- 
scious of  their  insufficiency." 

1  May  31,  1780,  Dip.  Cor.,  vol.  iii.  p.  144. 

2  Nov.  6,  1779,  Ibid.,  vol.  ii.  p.  267. 


240        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1780. 


During  the  next  year,  France  granted  new  loans ;  but 
Congress  drew  44  bills  extraordinary  "  on  Franklin,  to  the 
amount  of  nearly  three  hundred  thousand  dollars.  He 
was  sorely  perplexed.  Besides,  the  French  ministry  did 
not  like  the  proceeding,  as  the  revenues  of  the  govern- 
ment were  measured  by  its  wants,  and,  consequently, 
there  was  no  surplus  to  apply  to  new  purposes.1  To 
meet  the  last  bills  drawn  by  Congress,  Franklin  stipulated 
that  his  government  should  furnish  provisions  to  the 
king's  forces  in  America,  in  return  for  funds  sufficient  to 
pay  the  drafts,  and  immediately  wrote  to  the  president  of 
Congress  about  the  agreements.2  Gerard  had  proposed 
the  same  thing  in  December,  1778,  as  a  mode  of  dischar- 
ging the  indebtedness  of  Hortalez  &  Co.  to  the  govern- 
ment. At  the  same  time  Franklin  urged  the  necessity  of 
a  strict  compliance,  on  the  part  of  Congress,  of  the  assur- 
ance given  him  that  no  drafts  would  be  drawn  on  him  in 
the  future,  without  first  knowing  whether  he  had  funds 
in  his  hands  for  paying  them. 

As  Congress  greatly  needed  money,  Franklin  was  in- 
structed to  apply  for  another  loan ; 3  and  at  the  same 
time  John  Laurens  was  appointed  a  special  minister 
to  the  Court  of  Versailles,  as  it  was  believed,  that, 
coming  directly  from  his  country,  he  would  know  and 
feel  its  necessities  more  keenly,  and  press  these  with 
greater  force  upon  the  French  ministry.  But  Frank- 
lin was  by  no  means  indifferent  to  his  mission.  As  soon 
as  fresh  instructions  from  the  Committee  of  Foreign 

1  Dec.  2,  1780,  Dip.  Cor.,  vol.  iii.  p.  179. 

2  Dec.  2,  1780,  Ibid.,  p.  180;  Dec.  3,  1780,  Ibid.,  p.  182. 

8  Letter  of  Instructions  dated  Nov.  29,  1780,  Ibid.,  p.  176. 


1781.] 


FOREIGN  LOANS. 


241 


Affairs  were  received,  he  obtained  an  interview  with  Ver- 
gennes,  and  laid  the  necessities  of  America  before  him. 
It  was  not  until  March,1  1781,  that  he  was  assured  of  the 
king's  good  will  and  of  his  willingness  to  grant  more  aid 
to  the  United  States.  The  sum  of  six  million  livres  was 
granted,  not  as  a  loan,  but  as  a  free  gift,  a  part  of  which 
was  to  be  employed  in  making  purchases  in  France,  and 
the  rest  was  to  be  sent  to  the  United  States  with  the 
view  of  re-establishing  the  credit  of  the  government. 
The  French  Government  had  evidently  learned  the  slow, 
wasteful,  and  inefficient  ways  of  doing  business  by  com- 
mittees or  boards  established  by  Congress ;  and,  as  the 
gift  was  wanted  more  especially  for  the  army,  Washington 
alone  was  authorized  to  draw  bills  of  exchange  for  it 
gradually,  as  the  money  might  be  wanted  for  that  pur- 
pose. This  was  contrary  to  the  usual  mode  of  drawing 
them ;  and  Franklin  sought  to  have  them  drawn  by  the 
treasurer  of  the  United  States;  but  the  ministry,  with 
good  reason,  was  inflexible  on  the  point.  Franklin,  in  his 
philosophic  way,  adds  that  there  was  no  room  for  dis- 
puting this  determination,  as  every  donor  has  the  right 
of  qualifying  his  gifts  with  such  terms  as  he  thmks 
proper.2 

A  considerable  portion  of  the  gift  was  to  be  sent 
under  the  direction  of  Major  Jackson,  when  Franklin, 
seeing  a  rapid  increase  of  the  engagements  of  Congress, 
ordered  the  money  to  be  stopped  in  the  hands  of  the 
bankers.  The  event  gave  rise  to  a  very  lively  corre- 
spondence between   himself  and  Jackson.    The  latter 

1  Letter  dated  March  12,  1781,  Dip.  Cor.,  vol.  iii.  p.  192. 

2  March  12,  1781,  Dip.  Cor.,  vol.  iii.  pp.  192-194. 


242        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 

claimed  that  Franklin  had  no  control  over  the  money, 
as  it  had  been  obtained  by  the  efforts  of  Lee,1  and 
threatened  to  take  legal  proceedings  to  get  it,  if  Franklin 
did  not  revoke  his  order.  The  latter,  however,  was  not 
moved  either  by  Jackson's  representations,  appeals,  or 
threats.  Franklin  proved  clearly  that  Lee  had  not  been 
instrumental  in  obtaining  the  loan ;  and  he  certainly 
had  not,  as  the  correspondence  of  Lee  shows.  Jackson 
was  compelled  to  return  without  the  money ;  yet  Franklin 
never  accused  him  of  exhibiting  any  other  spirit  than 
that  of  great  and  commendable  zeal  in  the  service  of 
his  country. 

While  Laurens  had  done  nothing  in  the  way  of  pro- 
curing this  gift,  he  did  succeed  elsewhere  in  obtaining 
very  substantial  assistance.  For  a  long  time,  efforts  had 
been  put  forth  in  Holland  to  raise  loans  there,  but  with- 
out success.  Through  the  solicitation  of  Laurens,  how- 
ever, it  was  determined  to  procure  a  loan  in  that  country 
for  ten  million  livres,  the  King  of  France  agreeing  to  be 
security ;  and,  if  it  failed,  he  was  to  supply  the  sum  from 
his  o/wn  treasury  as  soon  as  possible.2  This  sum,  whether 
obtained  from  Holland  or  France,  was  to  be  repaid ;  and 
by  the  middle  of  May  four  millions  of  it  had  been  given 
to  Dr.  Franklin  to  discharge  bills  of  exchange  drawn  on 
him  by  order  of  Congress.  Soon  after  obtaining  this 
aid,  Laurens  returned  home. 

In  November,  Livingston,  secretary  of  foreign  affairs, 
wrote  to  Franklin,  representing  to  him  in  strongest  terms 

1  The  loan  was  certainly  due  to  Franklin's  efforts:  see  Franklin's 
Cor.,  Dip.  Cor.,  vol.  iii.  p.  230;  also  Lee's  Letters,  March  20,  1781,  Ibid., 
vol.  ix.  p.  208;  Sept.  2,  1781,  Ibid.,  p.  235.  2  Supra,  p.  252. 


1782.] 


FOREIGN  LOANS. 


243 


the  necessity  of  procuring  still  further  assistance  from 
the  king.1  Three  months  later,  Congress  passed  a  reso- 
lution2  to  the  same  effect,  fixing  the  amount  of  the  loan 
authorized  at  twelve  million  livres.  Morris  had  pre- 
viously urged  the  same  thing,3  though  his  demand  was 
for  three  millions  more  than  the  sum  specified  in  the 
resolution  of  Congress.  To  these  requests  Franklin  could 
make  only  one  answer,  and  this  was  such  as  they  had 
reason  for  expecting.  Having  granted  the  last  loan  with 
the  "  clearest  and  most  positive  assurances  that  it  was 
all  the  king  could  spare,"  and  that  no  more  could  be 
expected,  "  with  what  face,"  Franklin  exclaims,  "  could  I 
ask  for  another  six  millions?  It  would  be  saying,  you 
are  not  to  be  believed,  you  can  spare  more ;  you  are 
able  to  lend  me  twice  the  sum  if  you  were  but  willing." 
Of  course,  he  could  not  expect  any  further  aid,  and  it 
would  have  been  impolite  in  him  to  ask  it.4 

The  same  year  the  accounts  between  the  United  States 
and  France  were  examined  and  settled.  Dr.  Franklin,  in 
his  communication  upon  the  subject,  remarks  that  "all 
the  accounts  against  us  for  money  lent,  and  stores,  arms, 
ammunition,  clothing,  &c,  furnished  by  government,  were 
brought  in  and  examined,  and  a  balance  received,  which 
made  the  debt  amount  to  the  even  sum  of  eighteen 
millions."  5  In  this  reckoning  the  loan  of  ten  millions  by 
Holland,  which  had  been  guaranteed  by  the  French  king, 

1  Nov.  26,  1781,  Dip.  Cor.,  vol.  iii.  p.  250. 

2  Feb.  8,  1782. 

3  July  1.3,  1781,  Ibid.,  vol.  xi.  p.  377. 

4  June  25,  1782,  Ibid.,  vol.  iii.  p.  368. 

5  Aug.  12,  1782,  Dip.  Cor.,  vol.  iii.  p.  494.  When  Dr.  Franklin  made 
a  settlement  with  the  French  Government  July  16,  1782,  which  was 


244        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1782. 


was  excluded.  In  the  same  letter  Dr.  Franklin  communi- 
cates the  pleasing  intelligence  that  the  king  had  bestowed 
another  gift  of  two  millions,  which,  "  added  to  the  free 
gifts  before  made  to  us  at  different  times,  form  an  object 
of  at  least  twelve  millions,  from  which  no  returns  but 
that  of  gratitude  and  friendship  are  expected."  "  These," 
Franklin  adds,  "I  hope,  may  be  everlasting."1  He,  at 
least,  fully  appreciated  the  benevolence  of  the  king. 

The  next  year  another  loan  was  granted  of  six  million 
livres,2  which  was  the  final  one,  although  the  previous 
loan  of  the  same  amount  the  king  had  positively  declared 
was  the  last  pecuniary  aid  he  could  render.  Franklin 
assured  the  French  Government,  that,  under  the  admin- 


ratified  by  Congress  Jan.  22,  1783,  it  was  agreed  that  France  had  ad- 
vanced the  following  sums  under  the  various  loans  of  1778,  1779,  1780, 
1781,  1782. 


1778. 

28  February 
19  May  . 

3  August 

1  November 

1779. 

10  June  . 
16  September 

4  October 

21  December 

1780. 

29  February 
23  May  . 
21  June  . 


LIVRES. 

750,000 
750,000 
750,000 
750,000 

  3,000,000 


250,000 
250,000 
250,000 

750,000 
750,000 
750,000 


1,000,000 


Carried  for' d  .  2,250,000  4,000,000 


1780.  LIVRES. 

Brought  for'd .  2,250,000  4,000,000 

5  October       .  750,000 

27  November  .  1,000,000 

1781. 
15  February 


4,000,000 


15  May  . 
1  August 
15  August 
15  November 

1782. 

10  April  . 
1  July  . 
5  July 


750,000 
750,000 
1,000,000 
750,000 
750,000 

1,500,000 
1,500,000 
3,000,000 


4,000,000 


1,000,000 
18,000,000 


1  Aug.  12,  1782,  Dip.  Cor.,  vol.  iii.  p.  494. 

2  April  15,  1783,  Ibid.,  vol.  iv.  p.  103. 


1783.] 


FOREIGN  LOANS. 


245 


istration  of  Morris,  the  finances  at  home  had  improved ; 
and  it  was  no  doubt  in  consequence  of  his  representa- 
tions that  the  king  was  induced  to  grant  another  loan. 
Imagine  Franklin's  situation  and  feelings  when  rinding 
his  hopes  turn  into  delusions,  and  of  the  unwelcome 
necessity  of  telling  Vergennes  that  his  previous  assur- 
ances of  better  management  at  home  had  been  too  hastily 
given.  This  loan  Franklin  declared  the  king  had  not 
been  able  to  make  without  great  difficulties;  and  he 
was  "ordered  to  announce  to  Morris,"  to  whom  he  was 
writing,  "in  the  most  positive  manner,  that  it  will  be 
impossible  for  the  king,  under  any  supposition  whatever, 
to  procure  new  advances  of  money  for  Congress,  for  the 
next  3'ear." 

It  was  at  this  time  that  Franklin  wrote  to  Morris,  who 
was  now  superintendent  of  finance,  and  authorized  to 
negotiate  foreign  loans,  that  there  was  no  prospect  of 
procuring  additional  funds  "  until  the  United  States  shall 
have  established  a  permanent  public  revenue,  and,  the 
delay  and  repugnance  with  which  they  proceed  in  doing 
this  being  known  in  Europe,  the  inclination  for  lending 
money  to  Congress,  which  may  have  existed,  has  disap- 
peared; and  the  lenders  make  other  investments;  the 
speculations,  which  might  have  been  directed  towards  the 
United  States  go  further  and  further  from  them,  and  it 
will  certainly  be  difficult  to  bring  them  back."  He  then 
repeats  the  substance  of  Vergennes'  despatches  :  "  With- 
out the  speedy  establishment  of  a  substantial  public 
revenue,  and  without  the  vigorous  execution  of  the  en- 
gagements entered  into  by  Congress,  the  hope  of  obtain- 
ing loans  in  Europe  must  be  given  up."    The  Colonists 


246        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1783. 


resisted  taxation  by  Great  Britain  without  representation, 
and,  having  escaped  payment  of  the  burden,  they  were 
not  willing  to  resume  it,  even  when  the  establishment  of 
the  principle  for  which  they  contended  was  assured : 1  so 
their  credit  suffered  both  at  home  and  abroad ;  and  the 
wonder  is,  that  France  was  willing  to  grant  as  much 
assistance  as  she  did.  However  pure  were  the  motives 
which  constrained  her  to  furnish  aid,  the  desire  to 
diminish  the  pride  and  power  of  Great  Britain  must  not 
be  left  out  of  sight.  But,  whatever  her  motives  were, 
she  fulfilled  all  her  engagements,  thereby  setting  an 
•example  to  the  new-born  republic  worthy  of  imitation, 
which,  unhappily,  was  speedily  forgotten. 

Beside  the  pecuniary  assistance  rendered  directly  and 
indirectly  by  France,  both  Spain  and  Holland  granted 
loans,  the  history  of  which  may  be  briefly  traced.  One 
reason,  and  not  the  slightest,  why  European  nations  were 

1  Franklin's  views  on  taxation  are  interesting.  In  one  of  his  letters 
to  Morris,  he  writes,  "I  see  in  some  resolutions  of  town-meetings  a  re- 
monstrance against  giving  Congress  a  power  to  take,  as  they  call  it,  the 
people's  money  out  of  their  pockets,  though  only  to  pay  the  interest  and 
principal  of  debts  duly  contracted.  Money  justly  due  from  the  people  is 
their  creditor's  money,  and  no  longer  the  money  of  the  people.  All  prop- 
erty, indeed,  except  the  savage's  temporary  cabin,  his  bow,  his  matchuat, 
and  other  little  acquisitions  absolutely  necessary  for  his  subsistence,  seems 
to  me  to  be  the  creature  of  public  convention:  hence  the  public  has  the 
right  of  regulating  descents  and  all  other  conveyances  of  property,  and 
even  of  limiting  the  quantity  and  uses  of  it.  All  the  property  that  is 
necessary  to  a  man  for  the  conservation  of  the  individual  and  the  propa- 
gation of  the  species  is  his  natural  right,  which  none  can  justly  deprive 
him  of ;  but  all  property  superfluous  to  such  purposes  is  the  property  of 
the  public,  who  by  their  laws  have  created  it,  and  who  may,  therefore,  by 
other  laws,  dispose  of  it  whenever  the  welfare  of  the  public  shall  desire 
such  disposition."    Dec.  25,  1783,  Dip.  Cor.,  vol.  iv.  p.  187. 


1777.] 


FOREIGN  LOANS. 


247 


willing  to  assist  America,  was  to  obtain  a  portion  of  her 
trade,  nearly  all  of  which  had  been  previously  monopo- 
lized by  Great  Britain.  Holland  wanted  sugar  especially, 
because  she  was  largely  engaged  in  refining  it,  and  all 
the  nations  wanted  rice,  indigo,  and  tobacco.  This  was 
their  opportunity,  and  they  were  willing  to  incur  some 
risks  to  enhance  their  prospective  gains.  In  February, 
1777,  the  three  commissioners  appointed  by  Congress, 
soon  after  declaring  independence,  to  attend  to  the  af- 
fairs of  the  United  States  in  Europe,  resolved  to  sepa- 
rate :  Dr.  Franklin  was  to  remain  in  France ;  Lee  was  to 
go  to  Spain ;  and  Deane,  to  Holland ;  his  early  recall, 
however,  preventing  him  from  going  thither.  Lee  pro- 
ceeded to  his  destination,  and  soon  opened  negotiations 
with  the  Spanish  Government  for  a  loan.  As  the  king 
was  well  disposed  toward  the  United  States,  it  was  hoped 
that  Lee  might  be  successful  in  his  mission.  At  first, 
things  promised  well,  and  he  was  assured  that  powder 
and  clothing  would  be  sent  to  New  Orleans  for  the  use 
of  the  government,  and  that  a  "credit  on  Holland " 
would  be  given.1  In  December 2  the  three  commissioners 
wrote  from  Paris,  that  Spain  had  promised  to  send  three 
million  livres  in  the  course  of  the  year,  which  was  to  be 
sent  in  specie  from  Havana  to  the  United  States.  Spain 
was  quite  unlike  the  French  court  in  her  promises ;  for, 
notwithstanding  the  assurances  of  the  Spanish  ambassa- 
dor at  Paris  ("  a  grave  and  wise  man  ")  to  the  American 

1  April  9,  1777,  Dip.  Cor.,  vol.  i.  p.  275. 

2  Dec.  18,  1777,  Ibid.,  p.  357.  Lee  says,  "Our  friends  in  Spain" 
have  promised  to  supply  the  three  million  livres.  Jan.  15,  1778,  Ibid., 
vol.  ii.  p.  125. 


248        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778. 


commissioners,  that  his  court  piqued  itself  on  a  religious 
observance  of  its  word,1  she  advanced  only  a  hundred 
and  seventy  thousand  livres  of  the  sum  promised.2 

Several  times  the  promise  of  money  was  repeated.3 
Having  abandoned  the  idea  of  sending  funds  from  Ha- 
vana, they  were  to  be  paid  to  the  American  banker  in 
Paris  in  quarterly  payments ;  but  neither  from  Havana 
nor  from  the  banker  did  Lee  get  any  more  money.4 
Spain  was  repeatedly  pressed  to  supply  stores ;  and  orders 
were  given  for  furnishing  them :  they  were  shipped  from 
Bilboa,  and  were  to  be  paid  for  out  of  the  advances  made 

1  Dec.  18,  1777,  Dip.  Cor.,  vol.  i.  p.  275.         2  Ibid,  vol.  ii.  p.  133. 

3  June  1,  1778,  Ibid.,  vol.  ii.  p.  167. 

4  "Our  joint  despatches  of  the  28th  of  December,  1777,  informed 
you,"  writes  Arthur  Lee,  "  that  Spain  had  promised  us  three  millions  of 
livres,  to  be  remitted  to  you  in  specie  through  Havana.  This  informa- 
tion we  had  through  the  French  court.  We  have  since  been  informed 
through  the  same  channel,  that  it  would  be  paid  to  our  banker  here  in 
quarterly  payments.  Of  this  I  apprised  you  in  my  letter  of  the  15th  of 
January,  1778.  Finding  however  that  no  payment  was  made,  I  applied 
lately  to  the  Spanish  ambassador  here  for  an  explanation.  From  him  I 
learned,  that  by  order  of  his  court,  he  had  informed  the  Court  of 
France,  that  such  a  sum  should  be  furnished  for  your  use;  but  in  what 
manner  he  was  not  instructed,  nor  had  he  received  any  further  commu- 
nication on  the  subject.  He  promised  to  transmit  my  application  to  his 
court  without  delay. 

"  The  balancing  conduct,  which  these  courts  have  until  very  lately 
held  towards  us,  has  involved  us  inevitably  in  continual  contradictions 
and  disappointments.  It  is  in  this  respect  fortunate,  that  so  many  of 
our  dispatches  have  miscarried,  otherwise  you  would  have  been  equally 
vexed,  embarrassed  and  disappointed."  (Feb.  28,  1778,  Dip.  Cor.,  vol. 
ii.  p.  138.)  Lee's  allusion  to  the  date,  "28th  of  December,"  is  evidently 
a  mistake.  He  meant  the  letter  dated  18th  of  December,  to  which  we 
have  already  referred. 


1778.] 


FOREIGN  LOANS. 


249 


by  the  Spanish  Government.1  When  the  United  States 
authorized  the  first  loan  of  two  million  pounds,  Lee  en- 
deavored to  get  this  sum  "  through  the  hands  of  a  noble- 
man "  residing  in  Madrid ;  but  even  his  request  to  accept 
such  a  proposal  was  refused.2  Lee  then  tried  to  negotiate 
a  treaty  for  the  cession  of  Florida  in  return  for  money 
and  other  assistance ;  but  this  plan,  too,  failed.3  Finally 
Lee  gave  up  the  attempt  of  getting  any  thing  from  Spain, 
and  withdrew. 

John  Jay  succeeded  him.  His  mission  was  just  as 
unsuccessful  as  that  of  his  predecessor.  The  history  of 
his  efforts  can  be  summed  up  in  a  very  short  space,  for  it 
is  not  an  inviting  theme.  For  two  years  he  continued  at 
the  Spanish  court,  suffering  many  embarrassments,  de- 
lays, and  cold  treatment.  Promises  of  money  and  other 
supplies  were  made  to  Jay,  which  were  not  fulfilled ;  and, 
had  it  not  been  for  the  aid  furnished  by  Dr.  Franklin, 
he  would  have  been  obliged  to  abandon  his  post.  Bills 
were  drawn  on  him  from  home,  although  he  had  no 
money  to  pay  them ;  but  Franklin  came  to  his  rescue  on 
several  occasions.  Finally  Jay  was  obliged  to  suffer  bills 
to  be  protested,  though  not  exceeding  twenty-five  thou- 
sand dollars.  These  were  subsequently  paid  by  Franklin. 
During  Jay's  long  and  patient  negotiations  he  was  able 

1  May  23,  1778,  Dip.  Cor.,  vol.  ii.  p.  162;  June  15,  1778,  Ibid.,  p.  173. 
The  Spanish  house  of  Gardoqui  promised  to  send  military  supplies,  and 
did  send  money,  —  at  one  time,  81,000  livres,  and,  at  another,  106,500 
livres.  Dip.  Cor.,  vol.  ii.  pp.  40,  45,  49.  These  sums  were  repaid  out  of 
the  170,000  livres  advanced  by  the  Spanish  Government. 

2  Aug.  13,  1778,  Ibid.,  p.  179. 

3  Aug.  20,  1778,  Ibid.,  p.  180,  and  subsequent  letters  relating  to  the 
same  subject. 


250 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1778-80. 


to  obtain  one  hundred  and  *fifty  thousand  dollars.  Such 
was  the  extent  of  the  aid  furnished  by  Spain.1 

Let  us  turn  to  Holland,  which  at  this  time  was  one 
of  the  richest  countries  in  Europe,  whence  surrounding 
nations  drew  fresh  supplies  for  carrying  on  wars  and 
other  enterprises.  In  1778  the  American  commissioners, 
who  were  then  in  Paris,  resolved  that  one  of  -their  number 
should  go  to  Holland  with  the  view  of  procuring  a  loan 
there ;  and,  before  the  close  of  the  year,  Arthur  Lee 
wrote  to  the  committee  of  foreign  affairs,  "  Our  affairs  in 
Holland,  both  as  to  the  treaty  and  loan,  are  in  a  promis- 
ing state."  2  A  month  later  Lee  was  still  more  confident. 
"If  the  irritation  and  ill-humor  in  Holland  is  continued 
by  England's  persisting  in  the  interruption  of  their  trade, 
they  will  lend  us  money  out  of  revenge ;  and  if  England 
retracts,  the  Dutch  will  send  us  such  plentiful  supplies, 
and  take  in  return  our  produce,  as  in  a  great  measure  to 
compensate  for  the  want  of  funds."3  After  Deane's 
recall,  Adams  was  sent  to  fill  the  vacancy.  He  pro- 
ceeded to  Amsterdam,  whence  he  writes,  in  August,  1780,4 
that  he  was  sure  a  loan  could  be  obtained  by  any  one 
having  power  from  Congress  to  negotiate  it.  But,  when 
full  powers  for  that  purpose  arrived,  he  did  not  find  the 
same  willingness  to  loan  America  as  he  had  found  while 
he  was  without  authority  to  enter  into  such  an  engage- 

1  Jay's  Life  of  Jay,  vol.  i.  pp.  109,  110;  Dip.  Cor.,  vol.  vii.  pp.  300, 
304,  410;  Ibid.,  vol.  viii.  pp.  49,  70,  71. 

2  Oct.  19,  1788,  Ibid.,  vol.  ii.  p.  195. 
8  Nov.  15,  1778,  Ibid.,  p.  202. 

4  J.  Adams's  Works,  vol.  vii.  pp.  245,  246. 


1781.] 


FOREIGN  LOANS. 


251 


ment.1  Before  the  year  closed,  he  wrote  to  Franklin  that 
there  "was  not  a  prospect  of  obtaining  a  shilling."2 

Confiding  in  his  earlier  assurances,  Congress  drew  bills 
of  exchange  upon  Laurens,  who  had  been  previously 
designated  for  the  Dutch  post,  but  had  been  captured, 
and  afterwards  upon  Adams.  Had  it  not  been  for  Frank- 
lin, these  would  have  been  dishonored,  as  Adams  could 
procure  no  funds  from  any  other  source,  not  even  enough 
to  pay  his  own  expenses.  This  change  of  feeling  in 
respect  to  assisting  America  was  due,  in  part,  to  severe 
military  disasters;  but  Adams  affirmed  that  it  was  also 
"  due  to  fear  of  the  English  and  the  Stadtholderian 
party." 

Early  the  next  year,  having  failed  to  get  any  assistance 
from  the  government,  notwithstanding  his  earnest  and 
repeated  solicitations,  he  opened  a  loan,  which,  however, 
some  of  his  friends  thought  was  ill-advised.3  This  proved 
a  total  failure,  as  only  five  thousand  guilders  were  re- 
ceived, three  thousand  of  which  were  paid  upon  the 
promise  of  Luzac,  and  the  rest  by  M.  de  Neufville.  His 
proposals  for  a  loan,  though  well  received  by  the  public, 
Adams  writes,  have  as  yet  had  no  success.4  In  October 
the  situation  had  improved,  and  Adams  informed  Franklin 
of  the  fact.  The  same  month  he  wrote  to  the  president 
of  Congress : 5  "It  would  fill  a  small  volume  to  give  a 
history  of  my  negotiations  with  people  of  various  stations 
and  characters,  in  order  to  obtain  a  loan,  and  it  would 

1  Nov.  17,  1780,  J.  Adams's  Works,  vol.  vii.  p.  330. 

2  Nov.  30,  1780,  Ibid.,  p.  337. 

3  March  11,  1781,  Ibid.,  p.  376. 

4  Note  J.  Adams's  Works,  vol.  vii.  p.  376. 

5  Oct.  15,  1781,  Ibid.,  p.  472. 


252        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1783. 

astonish  Congress  to  see  the  unanimity  with  which  they 
all  have  refused  to  engage  in  the  business,  most  of  them 
declaring  they  were  afraid  to  undertake  it.  I  am  told 
that  no  new  loan  was  ever  undertaken  here,  without 
meeting  at  first  with  all  sorts  of  contradiction  and  oppo- 
sition for  a  long  time ;  but  my  loan  is  considered  not  only 
as  a  new  one,  but  as  entering  deep  into -the  essence  of  all 
the  present  political  systems  of  the  world,  and  no  man 
dares  engage  in  it,  until  it  is  clearly  determined  what 
characters  are  to  bear  rule,  and  what  system  is  to  prevail 
in  this  country."  In  the  same  letter  he  regarded  the 
situation  so  hopeless  as  to  ask  for  his  recall.  While  the 
loan  which  Adams  had  opened  remained  in  suspense, 
Laurens,  who  had  been  appointed  a  special  minister  to 
France  to  obtain  further  assistance,  succeeded  in  inducing 
the  French  court  to  open  a  loan  in  Holland  for  ten 
million  livres,  for  the  benefit  of  the  United  States,  the 
payment  of  which  was  to  be  guaranteed  by  France. 
Unhappily,  the  Dutch  flatly  refused  to  countenance  this; 
although  Neckar,  who  was  then  the  director-general  of 
the  French  finances,  supposed  the  grant  would  be  ob- 
tained easily  as  there  was  double  security  for  it.  The 
security  was  not  the  obstacle  in  the  way  of  its  success, 
but  the  fear,  that,  if  granted,  it  might  embroil  Holland 
in  a  war  with  Great  Britain,,  and  occasion  the  disturbance 
of  business.  France,  however,  came  to  the  rescue,  and 
agreed  to  make  the  advance  herself,  though  she  was  able 
subsequently  to  obtain  the  money  from  Holland  upon  the 
security  proposed  in  the  beginning. 

The  skies  began  to  brighten.  Early  the  next  year 
Adams  received  a  promise  from  Capellen,  secretary  of 


1782.] 


FOREIGN  LOANS. 


253 


state  for  Holland,  of  his  intention  "to  place  12,000 
florins  in  the  American  funds."  1  Adams  was  delighted 
to  find  that  Capellen  preferred  to  put  the  money  in  the 
loan  he  himself  had  proposed,  rather  than  in  the  loan 
made  with  the  warranty  of  France  and  the  republic,  be- 
cause it  was  a  more  frank  and  manly  acknowledgment 
of  America's  pretensions :  it  was  treating  America  in  her 
true  character. 

At  this  time  Adams  applied  to  a  great  banking-house 
in  Amsterdam,  which  had  traded  with  America  for  a  hun- 
dred years,  to  undertake  the  loan.  The  answer  received 
will  interest  the  reader,  because  it  shows  the  difficulties 
and  subtleties  in  making  loans  in  Holland  at  that  period, 
—  a  curious  revelation,  truly,  of  the  mysteries  of  finance 
then  practised  there.  Adams  was  told  the  house  would 
undertake  the  loan  if  it  was  found  possible  to  succeed; 
"  but  there  are  four  persons  who  have  the  whole  affair  of 
loans  through  the  republic  under  their  thumbs;  these 
persons  are  united ;  if  you  gain  one  you  gain  all,  and 
the  business  is  easy ;  but  without  them,  there  is  not  one 
house  in  this  republic  can  succeed  in  any  loan." 2  The 
banker  spent  two  days  in  exploring  the  field,  after  which 
time  he  called  again  on  Adams,  and  narrated  what  he  had 
done.  First  he  had  waited  on  one  of  the  regency,  and 
asked  him  if  it  was  proper  for  him  to  put  in  a  requite, 
and  asked  leave  to  open  such  a  loan.  He  was  answered 
he  had  better  say  nothing  to  the  regency  about  it,  for 
they  would  either  give  him  no  answer  at  all  (which  was 
most  probable  ),  or  say  it  was  improper  for  them  to  inter* 

1  Letters  Jan.  6,  14,  1782,  J.  Adams's  Works,  vol.  vii.  pp.  501,  502. 

2  Ibid.,  Letter  to  Franklin  Jan.  25,  1782,  p.  508. 


254        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1783. 

fere ;  either  of  which  answers  would  do  more  hurt  than 
good.  It  was  an  affair  of  credit,  which  he  might  under- 
take without  asking  leave ;  for  the  regency  never  inter- 
fered to  prevent  merchants  getting  money.  With  this 
answer  he  went  to  one  of  the  undertakers,  whose  answer 
was,  that,  at  least  until  there  was  a  treaty,  it  was  impos- 
sible to  get  the  money :  as  soon  as  that  event  should 
happen,  he  was  ready  to  undertake  it. 

"  I  have  been  uniformly  told,"  says  Adams,  "  that  these 
four  or  five  persons  had  such  a  despotic  influence  over 
loans;  I  have  heretofore  sounded  them  in  various  ways, 
and  the  result  is,  that  I  firmly  believe  they  receive  ample 
salaries,  upon  the  express  condition  that  they  resist  an 
American  loan.  There  is  a  phalanx  formed  by  British 
ministry,  Dutch  court,  proprietors  of  English  stocks,  and 
great  mercantile  houses  in  the  interest  of  the  British 
ministry,  that  support  these  undertakers  and  are  sup- 
ported by  them. 

"  We  may  therefore  reckon  boldly  that  we  shall  get 
nothing  here,  unless  in  the  form  of  the  late  five  millions 
lent  to  the  King  of  France,  and  warranted  by  the  repub- 
lic, until  there  is  a  treaty." 1 

In  May2  he  wrote  to  Franklin  on  the  subject.  The 
Dutch  bankers  were  not  ready  to  lend  to  America.  "  It 
is  true,  I  may  open  a  loan  for  five  millions,  but  I  confess 
I  have  no  hopes  of  obtaining  so  much.  The  money  is  not 
to  be  had.  Cash  is  not  infinite  in  this  country.  Their 
profits  by  trade  have  been  ruined  for  two  or  three  years ; 
and  there  are  loans  open  for  France,  Spain,  England, 

1  Jan.  25,  1782,  J.  Adams's  Works,  vol.  vii.  pp.  508,  509. 

2  May  2,  1782,  Ibid.,  pp.  580,  581. 


1782.] 


FOREIGN  LOANS. 


255 


Russia,  Sweden,  Denmark,  and  several  other  powers  as 
well  as  their  own  national,  provincial,  and  collegiate 
loans.  The  undertakers  are  already  loaded  with  burdens 
greater  than  they  can  bear,  and  the  brokers  in  the  repub- 
lic are  so  engaged,  that  there  is  scarcely  a  ducat  to  be 
lent,  but  what  is  promised.  This  is  the  true  cause  why 
we  shall  not  succeed ;  yet  they  will  seek  a  hundred  other 
pretences.  It  is  considered  such  an  honor  and  such  an 
introduction  to  American  trade  to  be  the  house,  that  the 
eagerness  to  obtain  the  title  of  American  banker,  is  pro- 
digious. I  think  it  clear,  after  very  painful  and  laborious 
inquiries  for  a  year  and  a  half,  that  no  house  whatever 
will  be  able  to  do  much.  Enthusiasm,  at  some  times  and 
in  some  countries,  may  do  a  great  deal ;  but  there  has  as 
yet  been  no  enthusiasm  in  this  country  for  America, 
strong  enough  to  untie  many  purses.  Another  year,  if 
the  war  should  continue,  perhaps  we  may  do  better."1 

1  On  the  16th  of  May,  Adams  wrote  to  Livingstone:  "I  wish  it  were 
in  my  power  to  give  Congress,  upon  this  occasion,  assurances  of  a  loan  of 
money ;  but  I  cannot.  I  have  taken  every  measure  in  my  power  to  accom- 
plish it,  but  I  have  met  with  so  many  difficulties  that  I  almost  despair  of 
obtaining  any  thing.  I  have  found  the  avidity  of  friends  as  great  an 
obstacle  as  the  ill-will  of  enemies.  I  can  represent  my  situation  in  this 
affair  of  a  loan  by  no  other  figure  than  that  of  a  man  in  the  midst  of  the 
ocean  negotiating  for  his  life  among  a  school  of  sharks.  I  am  sorry  to 
use  expressions  which  must  appear  severe  to  you,  but  the  truth  demands 
them.  The  circumstance  which  will  be  fatal  to  my  hopes  at  this  time 
is  this:  there  is  just  now  unexpectedly  opened  a  loan  of  nine  millions 
for  the  India  Company,  under  the  warranty  of  the  States,  in  which  they 
have  raised  the  interest  one  per  cent  above  the  ordinary  rate.  I  had 
obtained  an  agreement  of  the  undertakers  for  two  millions;  but  before 
it  was  completed  this  loan  appeared,  which  frightened  the  undertakers 
so  as  to  induce  them  to  fly  off."  —  J.  Adams's  Works,  vol.  vii.  p.  588. 


256        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1783. 

Negotiations  were  begun  with  the  house  of  Willink; 
and  in  July  1  Adams  had  the  pleasure  of  informing  Con- 
gress that  an  agreement  had  been  made  to  open  a  loan  of 
five  million  guilders,  which  was  to  bear  five  per  cent 
interest,  redeemable  in  five  years,  with  a  commission  of 
four  and  a  half  per  cent  for  procuring  the  loan  and  all  the 
charges  relating  thereto,  as  well  as  paying  off  the  loan  at 
maturity.  At  first,  only  three  millions  were  to  be  put  on 
the  market,  and,  if  this  sum  were  taken,  the  other  two 
millions  were  to  be  offered.  In  his  letter  to  Secretary 
Livingston,  announcing  what  he  had  done,  he  expresses 
his  doubts  of  getting  so  much  for  a  long  time.  "  If  we 
get  a  million  and  a  half,  by  Christmas,  it  will  be  more 
than  I  expect." 2  Adams  had  lost  faith  by  his  long  series 
of  disappointments.  Yet  in  little  more  than  a  month 
after  writing  this  letter,  1,484,000  florins  had  been  sub- 
scribed. By  November  the  sum  taken  was  between  one 
million  and  a  half  and  two  million  guilders.3  At  this 
time  Dr.  Franklin,  who  had  paid  Adams's  salary  and 
many  of  the  bills  which  Congress  had  drawn  upon  their 
representatives  in  Holland,  called  upon  Adams  to  pay  the 
interest  upon  the  ten-million  loan  of  France,  as  well  as 
bills  of  Congress  drawn  upon  himself.  Both  Adams  and 
Franklin  were  struggling  hard  to  preserve  the  credit  of 
Congress. 

One  reason  why  it  was  so  difficult  to  raise  money  was 
the  enormous  demand  for  it  by  nearly  all  the  nations  of 
Europe.  If  America  was  a  beggar,  England  was  a  far 
greater ;  while  France  and  other  countries  were  continu- 

i  July  5,  1782,  J.  Adams's  Works,  vol.  vii.  p.  599.        2  Ibid. 
3  Nov.  G,  1782,  Ibid.,  p.  657. 


1783-84.] 


FOREIGN  LOANS. 


257 


ally  borrowing  large  sums.  Money  had  grown  scarce, 
even  in  opulent  Holland ;  which  country  Franklin,  adopt- 
ing the  language  of  another,  was  inclined  to  think  was 
no  longer  "  a  nation,  but  a  great  shop,"  having  no  other 
sentiments  or  principles  but  those  of  shopkeepers.1 

Bills  were  drawn  more  rapidly  than  the  loan  could  be 
placed,  and  the  bankers  who  were  trying  to  negotiate  it 
came  very  near  protesting  them  to  the  amount  of  thirteen 
thousand  guilders.  Yet  they  did  not  despair  of  succeed- 
ing ;  for  they  proposed  to  open  a  new  loan  for  four  mil- 
lions, as  soon  as  this  was  filled,  bearing  six  per  cent 
interest.1  Adams  went  to  Holland  in  order  to  induce 
the  bankers  to  put  forth  greater  exertions ;  but  all  efforts 
on  his  part  gave  no  promise  of  success.  Finally,  in  order 
to  save  the  bills  from  going  to  protest,2  Adams  consented 
to  a  new  loan  for  two  million  guilders,  bearing  six  per 
cent  interest.  While  Adams  was  engaged  in  this  perilous 
struggle  to  save  the  credit  of  his  country,  Franklin  wrote 
to  him  that  he  did  not  wonder  the  regency  in  Holland 
had  declined  to  come  to  the  rescue,  and  save  the  bills,  on 
account  of  the  diversity  of  sentiment  prevailing  at  home 
about  the  plan  of  impost  which  had  been  urged  upon  the 
States  for  their  acceptance.  "I  hope  these  mischievous 
events,"  he  says,  "will  at  length  convince  our  people  of 
the  truth  of  what  I  long  since  wrote  to  them,  that  the 
foundation  of  credit  abroad  must  be  laid  at  home." 3 

Yet  this  was  not  the  only  reason  why  the  regency  de- 
clined to  assist  Adams.    It  was  the  establishment  of  a 

1  Dec.  26,  1783,  Jan.  24,  1784,  J.  Adams's  Works,  vol.  viii.  pp.  168, 
170. 

2  Feb.  5,  1784,  Ibid.,  p.  176.  «  Ibid.,  p.  177. 


258       FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1785. 

dangerous  precedent.  If  they  aided  the  United  States 
when  in  a  very  tight  place,  by  advancing  money  to  pay 
bills  drawn  upon  her  minister,  some  other  nation  might 
ask  a  repetition  of  the  same  favor. 

Adams  continued  successful  in  procuring  funds  for  his 
government,  although  the  condition  of  American  finances 
in  Europe  at  the  close  of  1784  were  poor  enough.  Beside 
the  scarcity  of  money  and  the  number  of  loans  in  the 
Dutch  market,  the  divisions  between  Congress  and  the 
States,  reports  of  which  came  to  Holland  through  English 
sources,  and  which  were  very  greatly  magnified,  made  an 
impression  upon  the  money-lenders,  "  who,"  says  Willink 
to  Adams,  "  always  incline  to  mistrust  without  cause, 
especially  at  a  time  when,  through  a  great  concurrence 
of  loans,  they  are  not  at  a  loss  with  their  money." 1  Not- 
withstanding all  these  obstacles,  lenders  continued  to 
loan  money  to  the  United  States  until  the  opening  of 
1785,  when  Adams  had  the  pleasure  of  announcing  that 
both  loans,  the  one  for  two  million  guilders  and  the  other 
for  five  million  guilders,  were  almost  full,  and  that  he  had 
on  hand  nearly  a  million  of  guilders.2 

Here  let  us  cut  this  thread  of  our  financial  history, 
merely  taking  note  of  the  fact  that  other  nations  in 
Europe,  beside  Holland,  France,  and  Spain,  were  invited 
to  loan  money  to  the  United  States ;  though  from  no 
other  sources  than  the  three  mentioned  was  any  assist- 
ance derived. 

1  J.  Adams's  Works,  vol.  viii.  p.  153. 

2  Jan.  10,  1785,  Ibid.,  p.  221.  For  amount  of  foreign  loans,  see  Bay- 
ley's  National  Loans  of  U.  S.  from  July  4,  1776,  to  June  30,  1880. 


1775-80.] 


LOAN-OFFICE  CERTIFICATES. 


259 


CHAPTER  XVIII. 

LOAN-OFFICE  CERTIFICATES. 

Before  sketching  the  financial  administration  of 
Robert  Morris,  the  result  of  the  loan-office  experiment 
will  be  briefly  described.  The  history  of  the  issue  of 
these  certificates  was  given  in  a  previous  chapter.1 

When  the  question  of  issuing  paper  money  was  first 
discussed  in  Congress,  as  we  have  elsewhere  related, 
Franklin,  and  perhaps  other  members,  strongly  favored 
a  loan  by  the  government :  nevertheless,  several  months 
elapsed  before  this  step  was  taken.  The  plan  was 
modelled  upon  a  scheme  invented  in  Virginia  in  1765, 
when  the  House  passed  a  bill  for  borrowing  two  hundred 
and  forty  thousand  pounds  sterling  from  British  mer- 
chants, at  five  per  cent  interest.2  A  fund  for  paying  the 
interest,  and  sinking  the  principal,  was  to  be  raised  by 
an  impost  duty  on  tobacco  ;  bills  of  exchange  were  to  be 
drawn  for  a  hundred  thousand  pounds,  the  avails  of  which 
were  to  be  employed  in  redeeming  the  paper  money  in  cir- 
culation ;  while  the  remainder  of  the  loan  was  to  be  lent  on 
permanent  security.  The  council  refused  to  sanction  the 
scheme.  Congress  now  revived  it,  confidently  believing, 
that,  if  the  people  would  liberally  subscribe,  the  necessity 
for  issuing  more  paper  money  would  cease,  and  its  value 
1  Chapter  iv.  2  Campbell's  Hist,  of  Virginia,  p.  539. 


260        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 

be  preserved.  This  was  indeed  a  rational  hope.  If  the 
people  subscribed  liberally  enough,  the  government  would 
certainly  get  all  the  funds  needed,  and  in  making  a  larger 
use  of  paper  money  its  value  would  be  better  maintained. 
Nevertheless,  the  experiment  was  a  failure,  as  complete, 
perhaps,  as  any  tried  during  the  revolution. 

These  loan-office  certificates  were  of  two  kinds,  —  one 
kind  bearing  interest  payable  in  specie ;  the  other,  in 
paper  money.  The  former  kind  was  the  more  popular. 
When  the  American  commissioners  in  Europe  gave  as- 
surance of  their  ability  to  borrow  specie  enough  to  pay 
interest  upon  all  the  sums  which  the  government  could 
probably  borrow  at  home,  and  sustained  their  word  by 
promptly  paying  all  bills  of  exchange  drawn  on  them 
for  the  discharge  of  interest,  the  more  patriotic  citizens 
of  the  country  especially  purchased  certificates  in  con- 
siderable quantities.  In  numerous  instances  property 
was  sold,  and  the  sum  received  was  invested  in  this 
manner. 

When  Congress  authorized  the  certificates,  it  was  not 
supposed  they  would  be  immediately  thrown  into  circula- 
tion. The  interest  they  bore,  it  was  thought,  would  be  a 
sufficient  inducement  to  the  holders  to  keep  them,  just  as 
persons  in  the  Eastern  States  had  done,  not  long  before, 
in  respect  to  some  bills  of  credit  which  had  been  issued 
bearing  interest.  Unhappily  they  were  not  hoarded : 
their  circulation  became  general,  effecting  essentially 
the  same  consequences  as  would  have  attended  the  issue 
of  an  equal  quantity  of  paper  money.  Instead  of  with- 
drawing paper  money  from  circulation,  the  effect  of  this 
experiment  was  really  to  increase  the  quantity,  and  con- 


1775-80.] 


LOAN-OFFICE  CERTIFICATES. 


261 


sequently  diminish  its  value.  The  very  fact  that  the  loan- 
office  certificates  bore  interest  led  persons  to  take  them 
in  preference  to  Continental  paper  money,  thus  depre- 
ciating the  .  value  of  the  latter.  Such  a  consequence  of 
issuing  them  the  wisest  men  of  the  day  had  failed  to 
foresee.  Gouverneur  Morris,  writing  in  1780,  says1  that 
when  they  were  first  issued,  "  it  was  truly  ludicrous  to  see 
the  solicitude  of  many  well-meaning  men,  to  pay  the 
public  debts  with  these  certificates  instead  of  the  common 
paper,  and  even  to  give  an  advance  in  purchases  to  those 
who  would  accept  of  them.  Nay,  it  was  no  uncommon 
argument  in  favor  of  a  large  grant,  that  some  considera- 
ble part  of  it  was  a  warrant  which  was  to  be  liquidated 
by  loan-office  certificates." 

In  effect,  therefore,  the  government  circulated  three 
kinds  of  paper  money, — one,  bearing  no  interest;  the  sec- 
ond, bearing  interest  payable  in  paper  money ;  and  a  third 
kind,  the  interest  of  which  was  payable  in  specie.  But 
the  interest  paid  by  the  government  answered  no  valuable 
purpose.  "A  measure  laudable,  perhaps,"  says  Gouver- 
neur Morris,  "  for  the  generosity,  if  with  the  exuberance 
of  public  revenue,  the  treasury  were  running  over,  but 
favoring  much  of  prodigality  in  some  other  circum- 
stances." 

When  the  evils  caused  by  the  certificates  did  appear, 
either  the  loan-offices  ought  to  have  been  closed,2  or  some 

1  Peiin.  Packet,  April  11. 

2  "I  only  contend  for  the  immediate  dissolution  of  the  loan  office; 
for  why  should  the  community  be  burthened  with  an  addition  of  taxes, 
merely  to  pay  an  interest  to  moneyed  men,  for  lending  paper  to  govern- 
ment; when  that  very  paper  could  be  as  well  made  without  any  other 
expense  than  striking  it;  and  the  larger  these  bills  the  better:  if  a  thou- 


262        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1775-80. 


other  measure  taken  to  check  the  unexpected  conse- 
quences we  have  described.  If,  however,  the  negotiability 
of  the  certificates  were  destroyed  or  lessened  by  action 
of  Congress,  it  was  feared  that  the  people  would  lend  no 
more  money  to  the  government.  Hence,  while  the  mis- 
chief was  seen,  no  one  was  wise  enough  to  devise  a 
remedy;  and  so  the  original  plan  was  continued,  the 
commissioners  paying  the  bills  of  exchange  given  for 
interest  until  the  1st  of  March,  1782,  when  it  was  impos- 
sible for  the  government  to  pay  interest  any  longer.1 

When  the  government  ceased  to  pay  interest  upon 
these  obligations,  the  event  was  a  very  unwelcome  one 
to  many  people.  Meetings  were  held,  and  Congress  was 
petitioned  to  continue  the  payment  of  interest.2  The 
following  letter,  addressed  to  the  printer  of  "  The  Penn- 
sylvania Packet," 3  expresses,  doubtless,  the  sentiments  of 
many  others  who  were  in  a  similar  situation  to  the  writer : 
"  I  am,  sir,  one  of  those  unfortunate  widows,  who,  at  the 
commencement  of  this  contest,  was  in  possession  of  a 
comfortable  income.  My  feelings  dictated  it  as  a  duty  to 
me,  that  I  ought  to  lend  every  assistance  in  my  power, 
tho'  a  weak  woman:  upon  which  I  put  what  money  I 
could  spare  into  the  public  funds,  and  although  but  a 

sand  dollars  each,  it  might  help  to  retard  the  circulation  and  lessen  the 
charge  of  printing  and  signing.  It  is  to  be  observed,  that  the  whole  of 
my  reasoning  on  this  subject,  turns  upon  the  assertion,  that  loan-office 
certificates  are  money  to  all  intents  and  purposes,  and  operate  in  pro- 
portion to  their  quantity,  equal  to  a  like  sum  of  Continental  bills  —  if  I 
am  wrong  my  conclusions  fall  to  the  ground."  — Penn.  Packet,  Jan.  20, 
1780. 

1  Am.  Slate  Papers  by  Lowrie  and  Clarke,  Finance,  vol.  i.  p.  147. 

2  Fenn.  Packet,  July  C,  1782.  8  Jan.  19,  1782. 


1775-80.]  LOAN-OFFICE  CERTIFICATES. 


263 


trifle,  received  my  interest  in  bills  npon  France  very 
punctually.  Encouraged  and  pleased  at  the  attention 
paid  to  the  public  credit,  I  sold  off  my  houses  and  lands, 
and  immediately  put  my  money  into  the  loan  office ;  but 
alas !  how  great  have  been  my  sufferings  since  that  time, 
having  never  received  for  this  last  sum  one  shilling  in- 
terest. Tis  true,  when  I  called  upon  the  loan  officer,  he 
offered  me  certificates,  but  said  he  had  no  money  and  to 
my  sorrow  I  found,  that  if  I  parted  with  these  certificates 
it  must  be  at  the  discount  of  twenty  to  thirty-three  and 
a  third  per  cent,  therefore  concluded  it  best  rather  to  be 
satisfied  with  the  whole  than  submit  to  such  an  imposi- 
tion ;  and  had  not  the  heavy  taxes  we  labor  under,  re- 
called to  my  mind  my  former  happy  circumstances,  I 
should  rather  have  been  a  silent  sufferer  than  made 
known  my  wants,  but  when  I  look  around  me  and  find 
that  the  little  furniture  I  have,  is  the  only  resource  left 
to  pay  those  taxes  and  support  an  aged  woman  I  cannot 
help  complaining  tho'  but  imperfectly.  Would  to  heaven 
some  abler  pen  would  take  up  the  talk,  and  endeavor  by 
representing  the  matter  in  its  proper  light,  to  awaken 
the  feelings  of  Congress,  and  give  them  a  proper  idea  of 
the  extreme  misery  and  distress  which,  great  numbers 
of  the  most  virtuous  of  our  fellow-citizens  are  involved 
in  thro'  the  same  neglect." 

A  resolution  was  passed  at  the  same  time  as  the  Forty- 
for-one  Act  redeeming  the  loan-office  certificates  according 
to  the  value  of  money  at  the  time  they  were  respectively 
issued.     "This  is  but  justice,"  remarked  Gerry1  in  a 

1  May  5,  1780,  J.  Adams's  Works,  vol.  vii.  p.  190. 


264        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1773-80. 

letter  to  Adams,  and  such  was  the  opinion  prevailing  at 
the  time.  But  a  long,  anxious  period  was  to  pass  before 
this  class  of  creditors  could  receive  their  dues,  even  upon 
such  a  basis.1 

1  Amount  of  loan-office  certificates  issued :  — 

From  beginning,  to  Sept.  1,  1777  ....  $3,787,900 

From  Sept.  1,  1777,  to  March  1,  1778   .      .      .  3,459,000 

From  March  1,  1778,  to  close  of  offices  .  ^    .      .  59,830,212 

See  Elliot's  Funding  System,  p.  53. 


BOOK  II. 

FROM  MORRIS'S  FINANCIAL  ADMINISTRATION  TO  THE  CLOSE 
OF  THE  CONFEDERATION. 


CHAPTER  I. 


THE  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS. 

The  news  of  Morris's  appointment  was  received  with 
gladness  by  all  the  friends  of  the  newly  created  govern- 
ment. Several  times  he  had  been  elected  delegate  to 
Congress,  and  had  always  served  with  distinguished 
ability.  At  the  time  of  accepting  office,  he  was  some- 
what less  than  fifty  years  of  age,  and  in  the  fulness  of 
physical  strength  and  financial  experience.  He  possessed 
great  energy  and  integrity,  and  his  patriotism  shone  con- 
spicuously throughout  the  Revolution.1  More  than  once, 
when  Washington^was  sorely  pressed  for  funds  and  other 
means  to  supply  his  army,  Morris  furnished  the  much- 
needed  relief.  Unquestionably,  a  fitter  person  for  the 
office  could  not  have  been  selected ;  and  Hamilton's  let- 
ter, addressed  to  him  after  his  election,  but  previous  to 
his  acceptance,  not  only  expressed  the  writer's  opinion, 
but  the  opinion  of  all  who  were  the  most  competent  to 
judge  concerning  the  man  and  the  office.  Hamilton 
assures  Morris  2  that  he  had  heard  with  the  greatest  satis- 
faction of  his  nomination  to  the  department  of  finance, 
and  that  long  ago  he  had  informed  his  friend  Duane  how 
desirous  he  was  for  Congress  to  make  the  appointment. 

1  Watson's  Annals  of  Philadelphia,  vol.  ii.  p.  329. 

2  Hist,  of  Repub.,  vol.  ii.  p.  212. 


268        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 


He  then  continues,  "  I  know  of  no  other  in  America  who 
unites  so  many  advantages ;  and,  of  course,  every  impedi- 
ment to  your  acceptance  is  to  me  a  subject  of  chagrin.  I 
flatter  myself  Congress  will  not  preclude  the  public  from 
your  services  by  an  obstinate  refusal  of  reasonable  condi- 
tions ;  and,  as  one  deeply  interested  in  the  event,  I  am 
happy  in  believing  you  will  not  easily  be  discouraged 
from  undertaking  an  office  by  which  you  render  America 
and  the  world  no  less  a  service  than  the  establishment  of 
American  independence.  'Tis  by  introducing  order  into 
our  finances,  by  restoring  public  credit,  not  by  gaining 
battles,  that  we  are  finally  to  gain  our  object.  'Tis  by 
putting  ourselves  in  a  condition  to  continue  the  war,  not 
by  temporary,  violent,  and  unnatural  efforts  to  bring  it 
to  a  decisive  issue,  that  we  shall  in  reality  bring  it  to  a 
speedy  and  successful  one.  In  the  frankness  of  truth,  I 
believe,  sir,  you  are  the  man  best  capable  of  performing 
this  great  work."  To  Franklin  the  appointment  was 
equally  welcome ;  and  he  expresses  his  "  great  pleasure  " 
to  Morris,1  "as  from  your  intelligence,  integrity,  and 
abilities,  there  is  reason  to  hope  every  advantage  that 
the  public  can  possibly  receive  from  such  an  office." 2 

1  July  26,  1781,  Dip.  Cor.,  vol.  xi.  p.  405. 

2  Washington  wrote  to  Morris,  June  4,  1781:  "I  felt  a  most  sensible 
pleasure  when  I  heard  of  your  acceptance  of  the  late  appointment  of 
Congress  to  regulate  the  finances  of  this  country"  (Spakks's  WasJi., 
vol.  viii.  p.  66).  "  The  public  sentiment  everywhere  pointed  to  Robert 
Morris,  whose  great  experience  and  success  as  a  merchant,  his  ardor  in 
the  cause  of  American  liberty,  his  firmness  of  character,  fertility  of 
mental  resources,  and  profound  knowledge  of  pecuniary  operations, 
qualified  him  In  a  degree  far  beyond  any  other  person  for  this  arduous 
and  responsible  station"  (Spakks's  Life  of  G.  Morris,  vol.  i.  p.  231). 


1781.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  269 


While  Morris's  acceptance  remained  in  suspense,1  the 
Board  of  Treasury  were  directed2  to  lay  before  Congress 
returns  from  the  loan  offices,  specifying  the  amount  of 
old  emissions  received  and  of  new  emissions  retained  by 
order  of  Congress,  also  the  amount  of  taxes  paid  by  the 
respective  States,  and  to  make  a  monthly  report  thereof 
in  the  future. 

After  Morris  had  accepted,3  the  Board  of  Treasury,  by 
his  request,  continued  to  transact  the  treasury  business 
until  he  could  disengage  himself  from  private  business, 
and  devote  his  chief  attention  to  the  duties  of  his  office. 
Thus,  for  several  months,  there  was  a  mixed  administra- 
tion of  the  finances,  Morris  increasing  his  attention  to 
them,  until  he  was  able  to  dispense  wholly  with  the 
services  of  the  Board  of  Treasury. 

Three  days  in  the  week  were  now  set  apart  for  the 
discussion  of  financial  measures.4    On  the  16th  of  March, 

1  Varnum,  a  Rhode-Island  delegate,  wrote  to  Gov.  Greene  from  Phil- 
adelphia, April  2,  1781:  "We  have  experienced  a  recent  instance  of 
political  diffidence.  Mr.  Robert  Morris,  of  this  city,  has  been  chosen 
financier.  Previous  to  his  final  acceptance,  he  insisted  upon  the  power 
of  removing  from  office  all  persons  intrusted  with  the  expenditure  of 
the  public  money,  for  abuse,  fraud,  &c,  without  being  answerable, 
except  to  the  party  injured,  in  the  courts  of  law.  Without  this  au- 
thority, he  despaired  of  introducing  economy,  so  essentially  important 
at  this  critical  situation.  A  majority  decided  against  the  proposition. 
The  consequence  is,  we  are  re-plunged  into  our  old  situation,  so  agree- 
able to  some  gentlemen,  and  I  fear  shall  not  be  able  to  effect  a  ref- 
ormation in  point  of  revenue  and  expenditure,  which  some  time  since 
many  of  us  hoped  and  firmly  expected." — Staples's  Hist,  of  B.  I.  in 
the  Cont.  Cong.,  p.  335. 

2  Feb.  9,  1781.  ' 

8  Morris  accepted  office  May  7,  1781. 
*  March  6,  1781. 


270        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 


1781,  an  important  measure  was  adopted,  providing  that 
all  debts  then  due  from  the  United  States,  which  had 
been  liquidated  in  specie,  "or  other  money  equivalent," 
should  be  actually  paid  either  in  gold  or  silver,  or  other 
money  equal  thereto,  according  to  the  current  exchange 
between  such  money  and  specie.  At  the  same  time,  the 
States  were  recommended  to  repeal  all  prior  legislation 
declaring  Continental  bills  of  credit  a  legal  tender,  thus 
making  their  legal,  correspond  with  their  real,  value. 
For  the  purpose  of  continuing  the  war,  the  States  were 
asked  in  November,1  1780,  to  furnish  six  million  dollars, 
partly  in  specific  articles  at  fixed  prices,  and  the  balance 
in  gold  and  silver,  in  four  quarterly  payments.  To  dis- 
charge this  requisition  more  easily,  as  well  as  prior  ones 
issued  by  Congress,  bills  of  credit  of  the  new  emission 
were  to  be  received  at  the  Federal  treasury  as  equal  to, 
and  in  lieu  of,  specie,  and  which  were  to  draw  interest 
from  the  time  of  payment  until  the  quotas  of  the  States 
were  finally  ascertained.2  If  in  the  end  it  should  appear 
that  any  State  had  been  assessed  for  more  than  its  just 
quota,  payment  of  interest  was  to  be  continued  upon  the 
surplus  ; 3  if  for  less,  interest  was  to  be  charged  upon  the 
deficiency,  until,  by  a  future  tax,  the  surplus  or  deficiency 
was  adjusted.  The  States  were  also  directed  to  make 
returns  to  the  Board  of  War,  to  the  first  day  of  June 
following,  of  every  thing  which  they  had  supplied  to 
Congress  or  its  officials ;  and  all  deficiencies  then  existing 
were  to  be  paid  within  three  months  thereafter. 4 

Congress  was  earnest  in  rescuing  the  country  from  the 

i  Nov.  4.  2  March  16,  1781.  8  March  23,  1781. 

*  March  16,  1781. 


1781.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  271 

grave  financial  perils  which  threatened  its  existence.1  As 
an  opinion  prevailed  that  the  bills  of  credit  of  the  new 
emission  were  interest-bearing  obligations,  Congress,  in 
order  to  settle  the  point,  declared  that  they  did  not 
draw  interest,  when  issued  from  loan-offices,  or  paid  for 
supplies,  or  when  given  in  discharge  of  public  debts.2 
By  this  enactment,  a  controversy  which  had  risen  to  con- 
siderable height  was  speedily  ended.  As  Adams  and 
Franklin  were  without  funds,  Congress  directed3  that 
no  more  bills  should  be  drawn  on  them ;  more  specific 
regulations  were  devised  concerning  the  settlement  of 
accounts;4  and  to  Morris  was  confided,5  by  renewed 
authority,  the  control  of  all  funds  loaned  by  foreign 
countries. 

The  first  investigation  into  the  affairs  of  the  treasury 
department  occurred  in  1781.  For  the  more  perfect 
transaction  of  the  public  business,  the  Board  of  Treasury 
allotted  certain  hours  for  receiving  applications  of  persons 
having  business  with  the  department,  besides  directing 
the  treasurer  of  loans  to  transmit  to  them  all  applications 
for  loan-office  certificates  and  bills  of  exchange.  These 
orders  gave  rise  to  "the  imputation  of  undue  pride  and 
insolence  of  office,"  and  led  to  a  serious  investigation  by 
Congress.  The  incident  illustrates  very  forcibly  the  ever- 
present  fear  in  the  public  mind  towards  office-holders, 
especially  in  men  like  Samuel  Adams,  who  lived  in  con- 
stant danger  of  the  office-holder  snatching  away  the 
liberties  of  the  people.    The  committee  of  investigation 

1  April  6, 1781. 

2  April  4, 1781,  but  see  action  of  Congress  of  June  2  of  the  same  year. 
8  April  10,  1781.         4  June  4,  1781.         5  Sept.  14,  23,  1782. 


272 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 


was  composed  of  sensible  men,  who  discovered  the  true 
motive  of  the  Treasury  Board  in  issuing  these  orders, 
which  was  to  serve  the  public  more  effectively:  conse- 
quently, the  charges  were  considered  groundless.1 

On  the  18th  of  April,  1781,  a  committee  reported  con- 
cerning the  debt,  the  manner  of  its  growth,  and  the  needs 
of  the  year.  The  public  debt  in  specie  amounted  to 
$24,057,577,  and  the  estimate  for  the  coming  year  was 
$19,507,457.  The  debts  owed  abroad,  as  nearly  as  the 
committee  could  ascertain,  were  six  million  dollars,  and 
the  annual  interest  thereon  was  three  hundred  and  sixty 
thousand  dollars.  The  record  of  the  domestic  debt  was 
so  badly  tangled,  that  no  one  could  give  the  correct 
amount,  nor  was  it  ever  ascertained.  The  obligations  of 
the  government  existed  in  several  forms,  and  bore  dif- 
ferent rates  of  interest.  Congress  now  resolved 2  to  liqui- 
date the  entire  public  indebtedness  in  specie  as  soon  as 
possible,  and  fund  the  same  in  interest-bearing  obliga- 
tions, if  the  creditors  consented.  The  States  were  in- 
formed that  the  estimates  of  Congress  were  made  in 
"  solid  coin,"  and  that  a  literal  compliance  with  the  requi- 
sitions was  expected.  Congress  could  no  longer  wait  for 
the  balance  of  the  quotas  of  three  million  dollars,  which 
had  been  assigned  nearly  eight  months  before :  so  the 
Continental  treasurer  was  directed  to  draw  orders  on  the 
States,  payable  within  thirty  days,  for  the  sum  remaining 
unpaid.3  He  was  further  directed  to  draw  for  sums  asked 
at  a  later  date.  Congress  supposed  the  States  would 
direct  their  treasurers  to  accept  these  orders  when  pre- 
sented, and  pay  them  when  they  fell  due. 

1  May  10,  1781.  2  May  22,  1781.  8  Ibid. 


1781.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  273 

The  next  financial  discussion  of  much  importance  re- 
lated to  the  establishment  of  a  national  bank,  which  was 
suggested  by  Morris  soon  after  his  active  assumption 
of  office.  Hamilton  had  previously  favored  the  trial  of 
this  experiment,  and,  in  a  subsequent  letter  addressed 
to  Morris,  all  the  details  of  a  plan  were  laid  before  him. 
Morris's  plan  was  speedily  approved  by  Congress , 1  and, 
as  soon  as  the  subscriptions  were  filled,  the  bank  was 
incorporated  under  the  name  of  "  the  president,  directors 
and  company  of  the  Bank  of  North  America,"  and  the 
States  were  recommended  to  pass  laws  forbidding  the 
establishment  of  any  rival  institution  during  the  war, 
and  that  its  notes,2  which  were  payable  on  demand  in 
gold  and  silver,  should  be  receivable  in  payment  of  taxes, 
duties,  and  debts  due  to  the  United  States.  The  capital 
was  four  hundred  thousand  dollars,  which  could  be  in- 
creased, and  the  right  of  inspection  was  given  to  the 
superintendent  of  finance.  Morris  relied  for  a  supply 
of  coin  upon  the  governor-general  of  Havana,  who  was 
to  be  repaid  by  annual  shipments  of  flour  guaranteed  by 
France ;  but  the  first  condition  of  the  engagement  was 
never  fulfilled.  When  the  bank  began  operations,  the 
amount  of  specie  in  its  vaults  did  not  exceed  forty  thou- 
sand dollars,  and  the  fear  of  an  early  exhaustion  of  this 
sum  was  so  great,  that  persons  were  employed,  during  the 

1  May  26, 1781.  Jefferson,  in  a  letter  to  one  of  his  correspondents,  says 
that  the  incorporation  of  the  bank  by  Congress  "  is,  perhaps,  the  only 
instance  of  their  having  done  that  which  they  had  no  power  to  do." 
—  Works,  vol.  ii.  p.  24. 

2  Dec.  31,  1781.  This  was  the  first  bank  in  America  that  redeemed 
its  bills  in  specie  on  presentation.  —  Arnold's  Hist,  of  R.  I.,  vol.  ii. 
p.  481. 


274        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 


earlier  and  more  critical  days  of  its  existence,  to  follow 
those  who  demanded  specie,  and  urge  them  to  return  it, 
in  'order  to  preserve  the  precious  foundation.  Notwith- 
standing every  effort  to  make  the  issues  of  the  bank 
safe,  they  circulated  in  the  beginning  from  ten  to  fifteen 
per  cent  below  par  in  the  Eastern  States ;  and  if  Morris 
had  not  taken  immediate  measures  to  create  a  demand 
for  them,  and  prevented  further  issues  from  going  thither, 
their  value  would  have  been  totally  lost  for  a  time. 
Once  gone,  their  value  could  not  have  been  easily  re- 
stored after  the  recent  costly  experience  of  the  people 
in  circulating  paper  money.  Morris,  however,  quickly 
checked  the  depreciation.  The  issues  of  the  bank  soon 
rose  to  par,  at  which  point  they  were  sustained  without 
further  difficulty. 

As  soon  as  the  bank  was  opened,1  Morris  wrote  to  the 
governors  of  the  States,  declaring  his  confidence,  that, 
with  proper  management,  the  institution  would  answer 
the  most  sanguine  expectations  of  those  who  had  be- 
friended the  undertaking.2  Besides,  it  would  facilitate 
the  management  of  the  finances  of  the  United  States. 
"  The  several  States  may,  when  their  respective  neces- 
sities require,  and  the  abilities  of  the  bank  will  permit, 
derive  occasional  advantages  and  accommodations  from  it. 
It  will  afford  to  the  individuals  of  all  the  States  a  medium 
for  their  intercourse  with  each  other,  and  for  the  payment 
of  taxes  more  convenient  than  the  precious  metals,  and 

1  Jan.  7,  1782.    Morris's  Diary,  Dip.  Cor.,  vol.  xii.  p.  76,  note. 

2  Morris  sought  to  interest  the  people  everywhere  in  the  bank,  and 
they  were  solicitor!  to  subscribe  to  the  stock;  but  in  the  South  especially 
none  were  found  willing  to  invest  in  the  enterprise.  — Greene's  Letter 
to  Morris,  Aug.  18,  1781,  Gueene's  Life  of  Greene,  vol.  iii.  p.  370. 


1781.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  275 


equally  safe.  It  will  have  a  tendency  to  increase  both 
the  internal  and  external  commerce  of  North  America, 
and  undoubtedly  will  be  infinitely  useful  to  all  the 
traders  of  every  State  in  the  Union,  provided  it  is  con- 
ducted on  principles  of  equity,  justice,  prudence,  and 
economy."  Such  were  some  of  the  advantages  which 
Morris  believed  would  spring  from  this  institution. 

Notwithstanding  its  early  trials,1  the  concern  sur- 
mounted them,  ministered  effectively  to  the  government, 
and  furnished  the  States  with  a  safer  and  more  conven- 
ient medium  of  exchange  than  specie.  Pennsylvania, 
however,  which  had  previously  granted  a  charter,  fearing 
the  power  of  the  corporation,  repealed  the  Act:  happily 
the  State  recovered  from  its  fright,  and  renewed  the 
charter  at  the  next  session  of  the  Legislature.  Such 
action  was  characteristic  of  the  times :  there  was  a 
terrible  dread  of  the  exercise  of  power.  Having  escaped 
from  the  tyranny  of  Great  Britain,  every  fresh  exercise 
of  authority  by  any  new  body  was  equally  dreaded,  even 
if  having  a  purely  native  source. 

Had  it  not  been  for  a  few  hardy  spirits  like  Morris, 
the  enterprise  of  establishing  public  freedom  in  this  land 
would  have  surely  failed,  for  several  times  was  the  coun- 
try reduced  to  an  almost  dying  condition.  Public  credit 
was  now  gone,2  requisitions  upon  the  States  for  money 

1  Hamilton  wrote  to  Morris,  Sept.  21,  1782,  that  the  contractors  who 
received  the  bills  carried  them  immediately  to  the  collectors,  and  drew 
specie  for  them,  in  consequence  of  which  they  did  not  get  into  circula- 
tion at  all.  —  Works,  vol.  i.  p.  308. 

2  "The  Congress  is  finally  bankrupt.  Last  Saturday  a  large  body 
of  the  inhabitants  with  paper  dollars  in  their  hats  by  way  of  cockades, 
paraded  the  streets  of  Philadelphia,  carrying  colors  flying,  with  a  dog 


276        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 


were  little  heeded,  and  the  only  aid  furnished  beside 
troops  was  specific  supplies.  There  were  a  vast  number 
of  unfunded  debts,  "  a  cumbrous  load  of  useless  paper," 
and  of  certificates  given  by  loan-officers  and  other  offi- 
cials for  specific  supplies ;  war  had  stripped  many  por- 
tions of  the  country ;  commerce  was  shattered ;  and  no 
where  did  system,  the  indispensable  handmaid  of  economy, 
prevail.  Yet  Morris  despaired  not.  In  a  letter  to  Frank- 
lin, after  depicting  faithfully  the  condition  of  things, 
Morris1  asks,  "But  what  else  could  be  expected  from 
us  ?  A  revolution,  a  war ;  the  dissolution  of  govern- 
ment, the  creating  of  it  anew ;  cruelty,  rapine  and  devas- 
tation in  the  very  midst  of  our  very  bowels.  These, 
sir,  are  circumstances  by  no  means  favorable  to  finance. 
The  wonder,  then  is,  that  we  have  done  so  much,  that 
we  have  borne  so  much,  and,  the  candid  world  will  add, 
that  we  have  dared  so  much." 

The  eye  was  turned  at  this  juncture  in  several  ways 

tarred,  and  instead  of  the  usual  appendage  and  ornament  of  feathers, 
his  back  was  covered  with  the  Congress'  paper  dollars.  This  example 
of  disaffection,  immediately  under  the  eyes  of  the  rulers  of  the  revolted 
Provinces/in  solemn  session  at  the  state-house  assembled,  was  directly 
followed  by  the  jailer,  who  refused  accepting  the  bills  in  purchase  of  a 
glass  of  rum,  and  afterwards  by  the  traders  of  the  city,  who  shut  up 
their  shops,  declining  to  sell  any  more  goods  but  for  gold  or  silver.  It 
was  declared  also  by  the  popular  voice,  that  if  the  opposition  to  Great 
Britain  was  not  in  future  carried  on  by  solid  money  instead  of  paper 
bills,  all  future  resistance  to  the  mother-country  were  vain,  and  must 
be  given  up."  (Rivington's  Gazette,  May  12,  1781,  cited  in  Moore's 
Diary  of  the  Am.  Rev.,  vol.  ii.  p.  425.)  Hamilton  wrote  to  Greene,  Jan. 
10,  1781,  "  Public  credit  is  so  totally  lost,  that  private  people  will  not 
give  their  aid,  though  they  see  themselves  involved  in  one  common 
ruin."  —  Works,  vol.  i.  p.  204. 

i  Nov.  27,  1781,  Dip.  Cor.,  vol.  xii.  p.  27. 


1781.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  277 

for  support.  Many  looked  towards  other  nations  for 
assistance.  The  slight  aid  furnished  by  them,  instead  of 
showing  the  futility  of  expecting  much,  only  encouraged 
the  people  to  expect  a  great  deal  more.  Again  and  again 
did  Franklin,  Adams,  and  Jay  recount  the  difficulties  in 
the  way  of  procuring  loans  from  abroad.  While  Mor- 
ris and  Livingston  urged  the  American  ministers  to 
renew  their  exertions,  they  never  ceased  to  tell  their 
own  countrymen  the  truth,  —  to  found  their  reliance 
upon  themselves,  and  not  upon  foreign  powers,  for  the 
means  necessary  to  carry  on  the  war.  Morris  was  con- 
tinually writing  to  the  governors  of  the  States,  and  put- 
ting this  obvious  truth  before  them  in  the  plainest  light : 
nevertheless,  many  of  them  lived  on  the  hope,  that,  as 
some  aid  had  been  contributed  by  foreign  nations,  they 
would  grant  still  more  abundant  relief. 

While  counting  upon  some  aid  from  France,  and  per- 
haps Holland,  Morris's  chief  reliance  was  upon  America 
herself.  In  most  countries,  the  materials  for  waging  war 
are  obtained  from  within :  the  spectacle  is  rare  to  see  a 
country  lean  so  heavily  as  did  America  upon  foreign 
nations  for  the  means  necessary  to  conduct,  a  military 
enterprise.  The  American  people,  though  bold  in  defy- 
ing the  authority  of  Great  Britain,  were  extremely  weak 
in  exercising  power  over  themselves  and  in  displaying 
their  latent  energies.  The  States  were  rich  enough  in 
almost  all  things  needed  to  wage  successful  campaigns, 
if  these  could  be  called  forth.  Therein  lay  the  chief 
difficulty.  How  could  the  resources  of  the  people  be 
fully  drawn  out?  Let  us  review  some  of  the  chief 
obstacles  lying  in  the  way. 


278        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 

In  the  first  place,  the  necessity  of  taxing  the  people 
was  seen  clearly  enough,  and  laws  were  enacted  by  all 
the  States  relating  to  the  subject ;  besides,  their  governors 
were  animated  with  a  high  degree  of  patriotism,  and 
were  enthusiastic  in  supporting  the  General  Government  : 
yet  only  small  sums  flowed  into  the  public  treasury.  The 
people  were  not  accustomed  to  taxes,  nor  had  the  various 
Legislatures  adopted  "  proper  modes  of  laying  and  levying 
them  with  convenience  to  the  people."  As  Morris  re- 
marked in  a  letter  to  Luzerne,  "Taxation  requires  time 
in  all  governments,  and  is  to  be  perfected  only  by  long 
experience  in  any  country." 1  America,  divided  as  it 
was  into  numerous  free  States  possessing  sovereign  power 
for  all  domestic  purposes,  could  not  be  suddenly  made 
to  pay  all  which  might  have  been  spared  from  the 
wealth  of  her  citizens.  Moreover,  the  enemy  always 
occupied  a  portion  of  the  country,  and  prevented  the 
:Collection  of  some  taxes.  At  one  time,  nearly  the  whole 
of  New  Jersey  was  overrun ;  at  another,  Georgia  and 
South  Carolina  seemed  almost  restored  to  British  rule. 
All  the  States,  in  turn,  felt  the  foreign  oppressor  taking 
possession  of  the  country,  despoiling  the  inhabitants,  and 
rendering  the  collection  of  taxes  uncertain  and  very  un- 
equal. 

Again :  a  portion  of  the  people  were  unwilling  to  pay 
them,  except  in  paper.  They  had  received  paper  money 
from  the  government :  why  should  it  not  be  repaid  ?  If, 
however,  Morris  renewed  the  circulation  of  it,  the  mis- 
chief which  he  was  trying  to  cure  would  be  prolonged.2 
The  paper  issues  were  enormously  inflated,  and  prudence 

1  Nov.  3, 1781,  Dip.  Cor.,  vol.  xii.  p.  4.       2  Ibid.,  pp.  4,  5. 


1781.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  279 


dictated  the  contraction  of  them  as  rapidly  as  possible  : 
on  that  point,  public  opinion  was  undivided.  Morris,  at 
first,  resolved  to  receive  all  that  were  offered,  and  to  re- 
issue a  portion,  thus  making  contraction  more  gradual, 
while  deriving  some  aid,  though  very  slight,  from  the  use 
of  paper  money.  In  no  instance  did  he  refuse  it ;  for  the 
people  would  lose  less,  he  thought,  by  paying  their  taxes 
with  it,  than  they  would  if  the  government  refused  to 
receive  it,  for,  in  that  case,  its  value  would  totally  dis- 
appear. So  Morris,  for  several  months,  received  all  the 
paper  tendered  in  payment  of  taxes ;  but  he  soon  stopped 
re-issuing  any  of  it,  thus  contracting  the  volume  of 
money:  though  the  redundancy  was  so  great,  and  its 
value  so  slight,  probably  no  one  ever  feared  a  disturbance 
of  prices  as  a  consequence  of  adopting  such  a  policy.1 

Although  the  people  were  free  to  return  the  money  in 
payment  of  taxes,  and  a  faithful  execution  of  the  recom- 
mendations of  Congress  and  laws  of  the  States  in  this 
respect  would  have  proved  most  salutary  in  reducing  the 
quantity,  and  preventing  a  part  of  the  loss,  at  least,  in 
the  hands  of  holders,  the  people  were  very  slow  in  paying 
either  paper  or  specie  to  the  collectors  in  discharge  of 
their  tax  dues.  After  Morris  had  been  in  office  more 
than  a  year,  he  wrote  to  Daniel  Clarke,2  in  reply  to  the 
charge  that  he  had  robbed  the  Eastern  States  of  their 
specie,  "  I  have  not  received  from  the  Eastern  States,  any 
more  than  from  the  Southern  States,  one  shilling  of 
specie,  since  I  was  appointed  to  my  present  office."  In 

1  See  Letter  to  Gov.  of  New  York,  Dec.  11,  1781,  Dip.  Cor.,  vol.  xii. 
p.  65. 

2  May  30,  1782,  Dip.  Cor.,  vol.  xii.  p.  169. 


280        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 

November,  1781,  he  writes  to  Franklin,1  that  the  past 
requisitions  of  Congress,  notwithstanding  his  pressing 
entreaties,  had  yielded  "  not  more  than  one  hundred 
thousand  dollars  "  during  his  administration.  He  informs 
the  president  of  the  State  of  Pennsylvania,  that  Congress, 
on  the  second  day  of  November,  1781,  assessed  that  State 
81,127,794,  payable  in  quarterly  sums,  commencing  the 
1st  of  April,  1782;  yet,  during  the  whole  of  that  year, 
there  had  been  received  towards  the  payment  of  this 
quota  only  $107,925,  —  less  than  one-tenth  of  the  sum 
required.2  In  July,  1783,3  he  addresses  a  circular  letter 
to  the  governors  of  the  States,  telling  them  the  unwel- 
come fact,  that  all  the  taxes  brought  into  the  treasury 
since  1781  did  not  amount  to  seven  hundred  and  fifty 
thousand  dollars.  Shortly  afterward  he  addressed  the 
following  communication  to  Congress,  which  shows  how 
tardily  the  States  had  complied  with  the  demands  of 
Congress.  South  Carolina  had  furnished  supplies  to  the 
troops  serving  there  in  sufficient  quantity  to  pay  her 
quota.  The  proportion  of  payment  to  assessment  in  the 
other  States  was  as  follows:  — 


Connecticut  and  New  Jersey 

.    each  about  | 

New  York  and  Maryland  . 

.    each  about  -fo 

.  about 

North  Carolina,  Delaware,  and  Georgia 

.    nothing  at  all.4 

1  Nov.  27,  1781,  Dip.  Cor.,  vol.  xii.  p.  31. 

2  Jan.  20,  1783,  Ibid.,  p.  323.  8  July  28,  1783,  Ibid.,  p.  389. 
4  Letter  to  Pres.  of  Cong.,  Aug.  1,  1783,  Ibid.,  p.  395. 


1781.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  281 


In  the  early  part  of  1784 1  he  sent  an  account  to 
Jefferson  of  the  taxes  which  had  been  paid  during  his 
administration  to  the  close  of  the  year  1783,  and  also 
the  arrearages  on  the  requisitions  for  the  years  1782  and 
1783,  which  exceeded  eight  million  dollars.  Surely,  this 
was  a  very  large  deficit.  Well  might  Morris  have  been 
appalled  with  the  magnitude  of  his  task,  when  loans 
were  obtained  with  so  much  difficulty  abroad,  and  collec- 
tions were  so  meagre  at  home. 

Another  source  of  aid  was  specific  supplies,  either  fur- 
nished by  the  States,  or  taken  by  officers  appointed  for 
that  purpose,  who  gave  certificates  therefor.  A  great 
portion  of  the  supplies  were  irregularly  obtained  in  this 
way.  Morris  was  strongly  opposed  to  the  system,2  be- 
cause it  was  so  "  extremely  wasteful  and  expensive,"  and 
led  to  widespread  corruption.3  He  sought  to  furnish 
supplies  by  contract,  because  it  was  more  economical:4 

1  Feb.  25,  Dip.  Cor.,  vol.  xii.  p.  468. 

2  Letter  to  Pres.  of  Cong.,  Nov.  5,  1781,  Ibid.,  pp.  11,  66. 

3  Washington  wrote  in  August,  1780,  "Every  day's  experience  proves 
#        more  and  more,  that  the  present  mode  of  obtaining  supplies  is  the  most 

uncertain,  expensive,  and  injurious  that  could  be  devised  "  (  Sparks' s 
Washington,  vol.  vii.  p.  158).  In  October,  the  same  year,  he  wrote,  "  The 
army,  if  it  is  to  depend  upon  state  supplies,  must  disband  or  starve  " 
(Ibid.,  p.  230;  see  also  Greene's  Life  of  Greene,  vol.  ii.  p.  247  and  note). 

4  The  plan  of  specific  supplies  was  also  defective,  because  there  was 
no  penalty  for  neglect  to  furnish  them;  yet  the  system  continued  to 
find  advocates  even  as  late  as  1783.  Dr.  Stiles,  in  his  Connecticut  elec- 
tion sermon  of  that  year,  said,  "Two  or  three  millions  can  more  easily 
be  raised  in  produce  than  one  million  in  money.  This  collected  and 
deposited  in  stores  and  magazines,  would,  by  bills  drawn  upon  these 
stores,  answer  all  the  expenditures  of  war  and  peace.  The  little  imper- 
fect experiment  lately  made  here  should  not  discourage  us." — Pulpit  of 
Am.  Rev.  Sermons,  ed.  by  John  Wingate  Thornton,  p.  425. 


282        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 

several  months  elapsed,  however,  before  he  was  permitted 
to  inaugurate  this  reform.1  The  quartermasters  and  com- 
missaries issued  the  certificates,  which  were  accepted  by 
the  States  in  return  for  supplies,  and  were  then  sent  to 
the  superintendent  of  finance  to  be  credited  on  their 
quotas,  just  as  though  they  had  furnished  money.  Mor- 
ris complained  because  he  could  not  use  them  as  money 
after  accepting  them.  This  complaint,  however,  was 
based  on  no  solid  foundation.  If  the  States  furnished 
supplies,  surely  it  was  the  duty  of  the  government  to 
acknowledge  the  fact;  but  why  should  the  receipts,  or 
certificates  of  indebtedness,  of  the  General  Government 
to  the  States,  be  retained  by  it,  and  used  as  money  ?  This 
was  one  step  farther  in  the  way  of  creating  paper  money 
than  Congress,  even  in  its  boldest  and  most  adventurous 
days,  had  dared  to  go.  It  was  impossible  to  ascertain  the 
amount  of  certificates  issued,  and  how  many  had  been 
returned  in  payment  of  taxes:  moreover,  they  choked 
every  plan  that  was  devised  for  restoring  the  public 
credit,  and  supporting  the  war.  In  respect  to  the  ras- 
cality attending  the  policy,  probably  the  certificates  given 
to  individuals  were  more  fraudulent  than  those  received 
by  the  governors  of  the  States.  Doubtless,  State  officials 
were  moved  with  greater  patriotism  in  furnishing  supplies 
voluntarily,  and  taking  receipts  therefor,  than  were  indi- 
viduals whose  property  had  been  taken  involuntarily  from 
them.  Morris,  therefore,  had  reason  for  saying  that  daily 
observation  confirmed  his  fears  that  frauds  had  been  prac- 
tised in  giving  such  certificates;  and  he  maintained  the 
opinion  that  a  general  permission  to  receive  them  in  pay- 


i  July  10,  1781. 


1781.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  283 


ment  of  taxes  would  be  very  injurious,  not  only  to  the 
public  revenue,  but  to  the  success  of  other  measures. 
"I  am  apprehensive,"  he  adds,  "that  many  honest  men 
through  the  United  States,  who  know  the  frauds  com- 
mitted in  their  neighborhoods,  will  imagine  that  sufficient 
attention  is  not  paid  to  the  detection  of  villany,  and  that 
idea  will  disincline  them  very  much  from  the  payment  of 
taxes,  because  nothing  induces  men  to  part  with  their 
money  so  cheerfully,  as  the  belief  that  it  will  be  applied 
to  the  purposes  for  which  it  was  granted,  with  economy 
and  integrity."  1 

Morris's  plan,  therefore,  was  to  destroy  this  system,  to 
compel  the  States  to  pay  their  taxes,  and  to  supply  the 
army  by  contract,  which  he  declared  to  be  the  universal 
and  much  more  economical  method.  He  writes  to  the 
governors  of  the  three  States2  farthest  south,  saying  it 
would  give  him  a  great  deal  of  pleasure  if  he  could  be 
put  in  such  a  situation  as  to  be  able  to  contract  at  once 
for  the  supplies  of  the  Southern  army;  but  he  had  not 
enough  specie  at  that  time  to  do3  this.    Morris  perse- 

1  Letter  to  Pres.  of  Cong.,  Nov.  5,  1781,  Dip.  Cor.,  vol.  xii.  p.  11. 

2  Dec.  19,  1781,  Ibid.,  p.  66. 

8  When  Morris  had  obtained  means  to  send  South,  he  intrusted  it  to 
George  Abbot  Hall,  who  followed  the  Southern  army,  and  made  ad- 
vances to  Greene  when  he  became  unable  to  get  supplies  from  any  other 
source  (Greene's  Life  of  Greene,  vol.  iii.  p.  412;  Marshall's  Life 
of  Wash.,  vol.  ii.  p.  25,  Phil.  1832).  Greene  did  not  know  that  Hall 
was  secretly  employed  by  Morris  for  this  purpose.  See  Life  of  Greene, 
Ibid. 

The  true  explanation  of  Morris's  mode  of  dealing  with  Greene  was 
afterward  made  by  Morris  to  Greene  himself.  Both  were  very  warm 
friends,  as  the  correspondence  between  them  clearly  shows;  and  Greene's 
latest  biographer  would  have  solved  Morris's  puzzling  conduct  in  a  very 


284        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 


vered.  Writing  to  Phelps,1  he  affirms  that  the  experi- 
ence of  other  countries  in  regard  to  the  best  mode  of 
furnishing  supplies  could  not  satisfy  America:  she  must 
learn  by  dear  experience  of  her  own.  He  adds,  however, 
that  it  had  finally  been  bought;  but  the  purchase  had 
nearly  been  the  ruin  of  the  country.  In  the  same  com- 
munication he  also  states,  "  I  have  succeeded  in  obtaining 

satisfactory  way,  had  he  vouchsafed  the  explanation  to  the  reader  which 
Morris  gave  to  Greene  during  a  subsequent  interview  at  Philadelphia. 
When  discussing  the  events  of  the  campaign,  Greene  told  Morris  of  the 
several  critical  junctures  when  money  was  furnished  him  by  the  secret; 
agent,  and  which  acts  he  regarded  as  interpositions  of  Providence. 
When  Greene  had  finished  his  story,  Morris  smiled ;  and  Greene  asked 
him,  "Why  do  you  smile,  Mr.  Morris?"  To  which  the  latter  replied, 
"Did  you  never  suspect  who  sent  this  person  to  you,  and  employed  him 
to  watch  your  motions?"  —  "No,"  replied  Greene.  "Did  it  never 
occur  to  you  that  he  was  employed  by  me?"  said  Morris.  "By  you, 
sir,"  said  Greene  angrily,  and,  seizing  the  hilt  of  his  sword,  exclaimed, 
"And  did  you  distrust  me?"  —  "My  confidence  in  you,"  replied 
Morris,  "was  greater  than  in  almost  any  human  being.  I  knew  that 
your  mental  resources  were  such  that  you  could  surmount  difficulties 
and  extricate  yourself  from  embarrassments  under  which  any  other  man 
would  have  sunk  —  but  I  knew  at  the  same  time,  that  if  this  money 
were  left  at  your  disposal,  you  would  use  it  before  the  time  of  your 
greatest  and  most  indispensable  necessity  arrived — therefore,  being 
limited  in  the  sum  of  money  appropriated  to  your  army,  and  sorely 
pressed  myself  on  every  hand,  I  found  it  incumbent  on  me  to  provide 
for  its  being  advanced  to  you,  only  when  it  became  impossible  for  you 
to  do  without  it."  After  reflecting  a  few  minutes,  Greene  said,  "You 
were  right,  sir;  I  should,  without  restriction,  have  made  use  of  it  too 
early,  and  your  precaution  has  been  the  means  of  saving  my  army."  — 
Extract  from  an  Essay  entitled  Bevolutionary  Reminiscences  connected 
with  the  Life  of  Robert  Morris,  American  Review,  vol.  vi.  p.  72;  see 
also  Waln's  Life  of  Morris,  Biog.  Signers  to  Dec.  of  Indep.,  yol.  v. 
p.  263,  et  seq.,  especially  p.  281. 

1  March  30,  1782,  Dip.  Cor.,  vol.  xii.  p.  126. 


1781.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  285 


many  contracts  on  very  reasonable  terms.  The  saving 
to  the  United  States  thereby  is  immense."  Nor  could 
he  leave  the  subject  without  observing  that  taxing  in 
specifics  is  expensive  to  the  people,  cumbersome  to  the 
government,  and  generally  inadequate  to  the  object.  If 
every  individual  were  left  to  dispose  of  his  property  as 
he  pleased,  and  compelled  to  pay  his  taxes  in  money  or 
bank-notes,  he  would  satisfy  the  tax  by  the  sale  of  much 
less  property  than  would  be  taken  by  a  specific  tax  of 
commodities.  Conclusive  as  was  this  reasoning,  Massa- 
chusetts adhered  to  the  former  system,  and  opposed  the 
plan  of  procuring  supplies  by  contract ;  but  it  received 
the  warm  approval  of  Washington.1  It  was  a  great  tri- 
umph for  Morris,  when,  after  long  and  severe  opposi- 
tion, he  was  permitted  to  try  the  experiment,  and  to 
see  the  end  of  a  system  which  was  extremely  loose,  and 
admirably  adapted  to  the  perpetration  of  enormous 
frauds.2 

Another  mode  of  getting  supplies  was  the  employment 
of  Morris's  own  splendid  credit,  which  he  often  stretched 
to  the  utmost,  but  never  abused.3  At  one  time,  he  re- 
quested Gen.  Schuyler4  to  furnish  the  army  with  flour, 
agreeing  to  be  personally  responsible;   at  another,  he 

1  April  23,  1782,  Dip.  Cor.,  vol.  xii.  p.  135. 

2  Inspectors  for  the  Southern  army,  to  watch  contractors  there,  were 
not  authorized  until  May  7,  1782. 

3  The  amount  of  these  notes  voluntarily  issued  for  the  benefit  of  the 
government,  and  circulating  as  cash  among  merchants  and  shopkeepers, 
without  depreciation,  except  very  slightly,  toward  the  close  of  the  war, 
was  §581,000.  —  Waln's  Life  of  Morris,  Biog.  Signers  to  Dec.  of  Indep.} 
vol.  v.  p.  303. 

4  May  29,  1781,  Dip.  Cor.,  vol.ai.  p.  367. 


286        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 


obtained  funds  from  the  commander  of  the  French  fleet, 
to  pay  the  American  army,  upon  his  individual  promise 
to  return  the  same  within  a  specified  period ;  and  many 
other  transactions  like  these  might  be  related.  In  no 
instance  did  he  fail  to  fulfil  his  promise,  though  on  several 
occasions  he  seemed  to  be  near  the  brink  of  failure.  At 
first,  the  people  of  the  Eastern  States  distrusted  Morris's 
ability  to  redeem  his  obligations,  which,  consequently, 
depreciated  from  ten  to  fifteen  per  cent:  ere  long  they 
rose  in  value  to  par,  and  were  taken  without  hesitation. 

Such  were  the  resources  of  Morris  to  maintain  the  gov- 
ernment, and  carry  on  the  war.  Foreign  loans  were  small 
and  precarious ;  taxation  at  home  yielded  still  less ;  while 
specific  supplies  from  the  States,  and  by  seizure,  gave 
rise  to  much  dissatisfaction  and  corruption.  When  every 
other  means  failed,  he  used  his  private  credit,  which  was 
always  higher  than  that  of  the  government.1 

Morris  determined  to  change  the  American  account  in 

1  Hamilton  wrote  to  Viscount  de  Noailles  in  1782:  "In  one  respect 
we  are  in  a  mending  way.  Our  financier  has  hitherto  conducted  himself 
with  great  ability,  has  acquired  an  entire  personal  confidence ;  revived, 
in  some  measure,  the  public  credit;  and  is  conciliating  fast  the  support 
of  the  moneyed  men.  His  operations  have  hitherto  hinged  chiefly  on 
the  seasonable  aids  from  your  country;  but  he  is  urging  the  establish- 
ment of  permanent  funds  among  ourselves:  and  though,  from  the 
nature  and  temper  of  our  governments,  his  applications  will  meet  with 
a  dilatory  compliance,  it  is  to  be  hoped  they  will  by  degrees  succeed. 

"The  institution  of  a  bank  has  been  very  serviceable  to  him:  the 
commercial  interest,  finding  great  advantages  in  it,  and  anticipating 
much  greater,  is  disposed  to  promote  the  plan;  and  nothing  but  mod- 
erate funds,  permanently  pledged  for  the  security  of  lenders,  is  wanting 
to  make  it  an  engine  of  the  most  extensive  and  solid  utility."  —  Works, 
vol.  i.  p.  310. 


1781.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  287 

Paris  from  the  banking-house  of  Grand  to  that  of  Le 
Couteulx,  &  Co. :  his  chief  reason  for  the  transfer  was  to 
keep  his  own  accounts  separate  from  those  of  the  Board 
of  Treasury.1  This  was  a  sufficient  reason ;  for  the 
American  accounts  abroad  were  confused,  though  not  so 
badly  as  the  accounts  at  home.  M.  Grand,  however,  had 
been  exceedingly  liberal  in  his  dealings  with  the  United 
States,  and  more  than  once  had  made  heavy  advances, 
which  were  not  repaid  for  a  long  period.  Franklin  was 
so  sensible  of  the  great  favors  received  by  the  country 
from  this  house,  that  he  wrote  warmly  to  Morris  on  the 
subject,  and  was  doubtless  pleased  to  learn  of  the  effect 
of  the  appeal,  as  Morris  concluded  to  follow  Franklin's 
wishes  in  the  matter.2 

In  various  ways  Congress  sought  to  retire  and  destroy 
the  old  paper  emissions.  It  was  clearly  seen  how  they 
deranged  the  finances  by  remaining  in  circulation.  Ac- 
cordingly, while  efforts  were  made  to  destroy  the  issues 
of  May,  1777,  and  April,  1778,  which  had  been  exten- 
sively counterfeited,  other  issues  were  received  for  taxes  ; 
the  treasurers  of  the  States  exchanged  them  for  bills  of 
exchange ;  and  they  were  borrowed,  and  payment  was 
made  in  bills  of  the  new  emission.  The  commissioners 
who  were  appointed  to  settle  the  accounts  of  the  States 
were  also  directed  to  destroy  all  the  old  issues  found  in 
the  State  treasuries,  not  exceeding  the  quota  due  to  the 
General  Government : 3  thus,  by  these  various  expedients, 
was  paper  money  withdrawn  from  circulation. 

1  Letter  to  Franklin,  June  8,  1781,  Dip.  Cor.,  vol.  xi.  p.  370. 

2  July  26,  1781,  Ibid.,  p.  407. 

8  Feb.  20,  27,  and  Sept.  18,  1782. 


288        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 

Morris  was  opposed  to  issuing  any  more  loan-office 
certificates,  and  directed  the  commissioners  of  those  offices 
to  settle  their  accounts.1  Not  only  were  certificates  given 
for  money  borrowed,  but,  when  interest  due  thereon  was 
not  paid,  other  certificates  were  issued  therefor.  Morris 
would  not  consent  to  giving  certificates  for  this  purpose, 
and  declared  that  he  would  never  consent  to  it.  "  Such 
accumulation  of  debt,"  he  said  to  the  governors  of  the 
States,  "  while  it  distresses  the  public,  and  destroys  its 
credit,  by  no  means  relieves  the  unfortunate  individual 
who  is  a  public  creditor ;  for,  if  revenue  is  not  provided, 
increasing  the  certificates  would  only  lessen  their  value. 
This  would  be  such  a  fraud  as  would  stamp  our  national 
character  with  indelible  marks  of  infamy,  and  render  us 
the  reproach  and  contempt  of  mankind.  It  is  high  time 
to  relieve  ourselves  from  the  ignominy  we  have  already 
sustained,  and  to  rescue  and  restore  our  national  credit. 
This  can  only  be  done  by  solid  revenue.  Disdaining, 
therefore,  those  little  timid  artifices,  which,  while  they 
postpone  the  moment  of  difficulty,  only  increase  the 
danger  and  confirm  the  ruin,  I  prefer  the  open  declara- 
tion to  all  of  what  is  to  be  expected,  and  whence  it  is 
to  be  drawn.  To  the  public  creditors,  therefore,  I  say 
that  until  the  States  provide  revenues  for  liquidating 
the  principal  and  interest  of  the  public  debt,  they  can- 
not be  paid ;  and  to  the  States,  I  say,  that  we  are  bound 
by  every  principle  held  sacred  among  men  to  make  that 
provision."    The  real  reason  for  giving  such  certificates, 

1  See  Letters  Oct.  13,  1781,  Dip.  Cor.,  vol.  xi.  p.  488;  Oct.  10?  1781, 
Ibid.,  p.  500;  March  30,  1784,  Ibid.,  vol.  xii.  p.  483;  April  29,  1784,  Ibid., 
p.  488. 


1781.1  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  289 


so  Morris  believed,  was  to  elude  actual  payments  by 
making  nominal  ones.  This  practice  he  unhesitatingly 
condemned.  Moreover,  he  wished  to  close  the  loan- 
offices  to  escape  the  expense  of  maintaining  them. 
Nine-tenths  of  the  expense  incurred  by  them  he  thought 
could  be  saved  by  committing  the  business  to  the  banks. 
Besides,  very  few  loan-offices  had  conformed  to  their 
instructions ;  and  their  accounts,  like  all  other  public 
ones,  were  inextricably  confused. 

At  the  beginning  of  Morris's  administration,  the 
amount  of  interest  due  on  loan-office  certificates  was 
seven  million  two  hundred  thousand  dollars,  which  was 
guaranteed  by  the  Court  of  France  and  payable  in  that 
country.  Notwithstanding  this  guaranty,  the  certificates 
had  depreciated,  and  were  daily  offered  for  sale,  produ- 
cing an  injurious  effect  on  public  credit.  The  interest 
amounted  to  two  million  one  hundred  and  sixty  thou- 
sand livres  annually,  "  a  sum  which  in  less  than  ten  years 
would  pay  a  debt  of  fifteen  millions  of  livres  at  five  per 
cent  interest."  Morris  believed,  that  with  this  sum  he 
could  buy  all  the  certificates,  and  urged  Franklin  to  lay 
the  plan  of  buying  them  before  M.  Neckar,  and  solicit  his 
co-operation,  as  it  was  obviously  for  the  advantage  of  both 
countries  to  effect,  if  possible,  such  an  arrangement.  The 
plan  failed,  because  the  French  minister  declined  to  grant 
the  funds  necessary  for  the  purpose.1 

The  loan-office  commissioners  were  not  the  only  per- 
sons singled  out  to  settle  their  accounts.2    From  the 

1  Letter  to  Franklin,  July  13,  1781,  Dip.  Cor.,  vol.  xi.  p.  380. 

2  See  action  of  Congress  respecting  the  settling  of  the  accounts  of  the 
army,  July  4,  11,  1783. 


290        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1782. 


beginning  of  his  administration,  Morris  always  kept  two 
things  before  him,  —  the  settlement  of  the  State  accounts 
and  the  funding  of  the  public  debt.  The  ascertainment 
and  liquidation  of  these  accounts,  he  believed,  would 
produce  a  better  feeling  among  the  States,  and  bring 
more  willing  contributions  from  them  into  the  public 
treasury.  Some  States  went  so  far  as  to  say,  that,  hav- 
ing contributed  beyond  their  proportion,  they  would  not 
furnish  any  thing  more  until  there  was  a  final  settlement. 
Acts  were  passed  by  Congress  for  that  purpose  early  in 
1782,1  in  compliance  with  the  wishes  of  Morris.  In  a 
circular  letter  to  the  governors,  enclosing  copies  of  them, 
Morris  observes  that  "  it  is  to  the  want  of  a  decision  on 
this  point,  that  the  languor  and  want  of  exertion  of  the 
several  States  are  to  be  attributed.  That  fatal  assertion, 
that  each  has  done  most,  which  each  has  made  and  re- 
peated, until  it  has  gained  but  too  much  credit,  would 
never  have  obtained  a  place  in  the  minds  of  men,  who 
really  love  their  country  and  cause,  had  the  requisitions 
of  Congress  been  made  annually  for  money,  and  the 
quotas  fixed  finally  at  the  date  of  the  demand.  The 
compliances  of  each  would  in  that  case  have  determined 
their  respective  merits  or  demerits ;  we  should  then  have 
seen  a  competition  the  very  reverse  of  that  which  has 
for  some  time  past  prevailed ;  and  it  is  not  yet  too  late." 
He  then  urges  the  governors  to  settle  all  accounts  of 
past  expenditures,  adjust  the  shares  of  each  State ;  "  but," 
he  adds,  "  let  the  settlement  be  final,  or  we  do  nothing." 2 

1  Jan.  9,  11,  Feb.  20,  27,  1782;  Feb.  27,  March  4,  July  16,  Aug.  11, 
1783. 

2  April  15,  1782,  Dip.  Cor.,  vol.  xii.  p.  130;  see  able  letters,  July  25, 


1781.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  291 

He  sent  such  accounts  as  he  was  able  to  extract  from 
the  treasury  books  to  the  governors  of  the  States,  and,  in 
addition,  requested  them  to  furnish  information  respecting 
the  revenue  laws  in  force  in  their  several  jurisdictions,  the 
mode  of  collecting  taxes,  the  funds  in  the  treasuries, 
the  appropriation  of  them,  and  the  date  and  amount  of 
the  various  paper  issues  which  had  been  authorized.  To 
these  inquiries  and  efforts  hardly  a  response  was  heard : 
consequently  no  progress  worth  mentioning  was  made  in 
adjusting  the  accounts  between  the  States  and  the  Gen- 
eral Government.  At  a  later  period  during  his  adminis- 
tration, Morris  declared  to  the  president  of  Congress  his 
most  serious  apprehensions  from  the  existence  of  unset- 
tled accounts  among  the  States.  He  likewise  submitted 
to  Congress  the  following  plan  for  extricating  the  Gen- 
eral Government  and  the  States  from  the  embarrassment 
caused  by  the  confusion  of  accounts,  —  to  place  the  whole 
sum  expended  for  the  public  service,  from  the  commence- 
ment of  the  war,  by  each  State,  to  its  credit,  and  allow 
interest  thereon.  "By  these  means,"  he  assures  Con- 
gress,1 "  the  whole  account  would  be  equitably  settled  in 
the  first  instance.  The  States  which  are  indebted  on 
their  own  private  account,  would  be  able  to  wipe  off  such 
debts  by  an  assignment  of  national  stock.  And  on  the 
first  requisitions  made  by  Congress  for  current  expendi- 
tures, each  might  make  payment,  either  in  part,  or  per- 
haps in  the  whole,  by  a  discharge  of  so  much  of  the 
debt."    The  execution  of  such  a  plan,  he  thought,  would 

1781,  Dip.  Cor.,  vol.  xi.  p.  400;  Aug.  28,  1781,  Ibid.,  p.  442:  Nov.  5, 
1781,  Ibid.,  vol.  xii.  p.  9. 

1  March  8,  1783,  Ibid.,  p.  335. 


292        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 

introduce  simplicity  into  the  affairs  of  the  government, 
and  avoid  many  evils :  Congress,  however,  never  heeded 
the  recommendation. 

But  Congress  did  long  and  patiently  toil  over  another 
remedy,  which,  if  adopted,  would  have  been  effectual,  — 
the  assent  of  the  States  to  the  imposition  of  a  tax  of  five 
per  cent  upon  importations.  At  first  it  was  proposed 
to  vest  the  United  States 1  with  the  right  of  superintend- 
ing the  commercial  regulations  of  every  State,  in  order  to 
prevent  the  enactment  of  any  laws  partial,  or  contrary  to 
the  common  interest ;  and  also  with  the  exclusive  right 
to  lay  duties  upon  imports,  though  no  restriction  was  to 
be  valid,  or  duty  laid,  without  the  consent  of  nine  States. 
The  duties  were  to  be  uniform  throughout  the  Union ;  the 
income  therefrom  was  not  to  be  used  in  paying  "  perpetual 
annuities ,  "  and  the  power  of  laying  them  was  to  continue 
only  for  a  fixed  period.  Congress  regarded  this  as  a  dan- 
gerous extension  of  power,  which  the  States  would  not 
grant.  Accordingly,  the  resolution  was  modified ;  and  it 
was  "  recommended  to  the  several  States,  as  indispensably 
necessary,  that  they  vest  a  power  in  Congress,  to  levy  a 
tax  for  the  use  of  the  United  States,  a  duty  of  five  per 
cent  ad  valorem,  at  the  time  and  place  of  importation, 
upon  all  goods,  wares  and  merchandise  of  foreign  growth 
and  manufactures,  which  may  be  imported  into  any  of 
the  said  States  from  any  foreign  port,  island  or  planta- 
tion, after  the  first  day  of  May,  1781,  except  arms,  ammu- 
nition, clothing,  and  other  articles  imported  on  account 
of  the  United  States,  or  any  of  them,  and  except  wool- 
cards  and  cotton-cards  and  wire  for  making  them ;  and 


i  Feb.  3,  1781. 


1781.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  293 

also  except  salt  during  the  war ;  also,  a  like  duty  of  five 
per  cent  on  all  prizes  and  prize  goods,  condemned  in  the 
court  of  admiralty  of  any  of  these  States  as  lawful  prize ; 
that  the  moneys  arising  from  the  said  duties,  be  appropri- 
ated to  the  discharge  of  the  principal  and  interest  of  the 
debts  already  contracted,  or  which  may  be  contracted,  on 
the  faith  of  the  United  States,  for  supporting  the  present 
war;  that  the  said  duties  be  continued  until  the  said 
debts  shall  be  fully  and  finally  discharged."  Congress, 
supposing  the  States  would  assent  to  this  arrange- 
ment, voted,  that,  as  soon  as  any  of  them  consented 
to  vest  the  power  of  laying  duties  in  Congress,  that 
body  would  proceed  to  collect  them,  giving  each  State 
credit  for  the  duties  collected  within  its  territory. 
Morris  declared  this  recommendation  to  be  "  of  the 
utmost  importance,"  and  that  every  day  gave  it  "  an  ad- 
ditional weight  and  magnitude."  He  answered  various 
criticisms  of  the  measure,  among  others  the  objec- 
tion that  commerce  could  not  bear  a  five  per  cent  duty. 
"  Those  who  make  such  assertions,"  he  affirmed,  "  must  be 
very  little  acquainted  with  the  subject.  The  articles  of 
commerce  are  either  such  as  people  want,  or  such  as  they 
do  not  want.  If  they  be  such  as  people  want,  they  must 
be  purchased  at  the  price  for  which  they  could  be  had, 
and  the  duty  being  on  all,  gives  to  no  seller  any  advan- 
tage over  another.  If,  on  the  contrary,  the  article  be  such 
as  people  do  not  want,  they  must  either  increase  their 
industry,  so  as  to  afford  the  use  of  it  with  the  duty,  or 
else  they  must  dispense  with  that  use.  In  the  former 
case,  the  commerce  is  just  where  it  was,  and  in  the  latter 
case,  the  people  consume  less  of  foreign  superfluities, 
which  certainly  is  a  public  benefit." 


294        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 


Connecticut  sought  to  appropriate  the  revenues  flowing 
from  this  source  for  the  payment  of  her  own  obligations, 
which  gave  rise  to  further  discussion  of  the  measure  by 
Congress.1  The  State  was  recommended  to  revise  her 
legislation,  and  conform  to  the  resolves  of  Congress, 
which  she  afterwards  did.  All  the  States  complied  with 
the  recommendation  without  long  delay,  except  Rhode 
Island,2  whose  defence  was  essentially  the  following :  The 
impost  would  draw  a  disproportionate  supply  from  either 
merchant  or  consumer ;  she  imported  and  consumed  more 

1  March  22,  1781. 

2  However  strongly  the  action  of  the  governor  and  of  others  at  home 
was  to  be  condemned,  the  views  of  the  delegates  who  represented 
Rhode  Island,  when  this  subject  first  arose  for  discussion  in  Congress, 
were  eminently  sound,  as  will  appear  from  the  following  letter,  which 
Yarnum  and  Mowry  wrote  to  the  governor,  Aug.  14,  1781:  "We  are 
at  loss  to  conjecture  the  rumors  which  have  induced  the  State  of  Ehode 
Island  to  delay  complying  with  the  requisitions  of  Congress,  respecting 
the  five  per  cent  duty.  This  requisition  was  so  essential  to  the  adoption 
•of  a  regular,  frugal,  and  productive  system  of  finance,  that  we  cannot 
enter  into  the  necessary  details  of  a  permanent  revenue  without  realizing 
it.  It  must  be  obvious  that,  unless  we  call  forth  the  resources  of  the 
respective  States  equally,  it  will  be  impossible  to  execute  any  great 
objects  while  the  States  who  do  most  will  be  the  greatest  sufferers.  It 
is  as  obvious  that,  without  a  permanent  revenue  in  the  disposal  of  the 
United  States,  we  can  neither  fulfil  past  engagements,  nor  obtain  future 
credit.  The  resources  of  the  country  are  not  sufficient  to  carry  on  the 
war,  without  anticipating  the  revenues.  This  cannot  be  done  without 
credit,  nor  this  exist  without  funds.  We  have  not  a  doubt  but  what 
matters  will  soon  be  put  into  such  a  train  as  to  settle  the  public  accounts 
on  equitable  principles.  Measures  are  undertaken  by  Congress  to  enable 
the  financier  to  adopt  such  modes  as  will  do  justice  to  all  the  States,  and 
remove  those  unhappy  consequences  which  result  from  a  mutual  jeal- 
ousy. We  must  therefore  beg  liberty  to  urge  the  propriety  of  the  meas- 
ures, and  a  compliance  with  them."  —Staples' s  Ilist  of  B.  I.  in  the 
Cont.  Cong.,  p.  349. 


1781.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  295 


foreign  commodities  in  proportion  than  any  other  State ; 
her  maritime  situation  would  expose  her  to  great  losses ; 
the  exclusive  benefit  of  the  impost  should  be  carried  to 
the  account  of  the  State ;  the  impost  would  raise  prices, 
and  therefore  manufactures  bought  from  the  neighboring 
States  would  draw  a  revenue  from  Rhode  Island;  the 
duties  imposed  by  the  neighboring  States  might  compel 
her  to  subsist  by  foreign  articles;  many  would  be  em- 
ployed in  their  collection;  smuggling  would  become 
prevalent ;  and,  lastly,  the  collection  might  be  objectiona- 
ble. Morris  was  requested  by  a  committee  of  Congress 
to  answer  these  objections.  To  the  first  objection  he 
replied,1  that  all  must  admit  the  necessity  of  a  revenue 
from  some  source.  "Is  it  then  wise,"  he  asks,  "to  raise 
a  part  of  it  from  the  consumption  of  foreign  articles  ?  I 
say  the  consumption,  because  the  tax  undoubtedly  falls 
on  the  consumer  and  not  on  the  importer.  If  this  be  not 
a  wise  tax,  what  shall  we  substitute  ?  Articles  of  primary 
and  immediate  necessity  are  made  in  the  State  of  Rhode 
Island.  Both  food  and  raiment  can  be  had  without  cross- 
ing the  Atlantic  in  search  of  them.  Every  man,  there- 
fore, is  at  liberty  to  use  foreign  articles  or  not.  If  he 
does  use  them  the  tax  is  voluntary,  and  therefore  cannot 
be  considered  disproportionate,  any  more  than  for  one  to 
wear  silk  while  another  wears  wool."  The  truth  of  the 
second  objection  was  denied,  and,  in  respect  to  the  third, 
he  thought  New  York  had  suffered  as  much  and  as  long 
as  Rhode  Island,  and  that  her  advantageous  maritime 
position  could  not  be  adduced  as  a  plea  for  exempting 
her  from  bearing  public  burdens.    That  an  import  duty 

1  Aug.  2,  1782,  Dip.  Cor.,  vol.  xii.  p.  242. 


296        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [17S2. 

should  be  carried  to  the  account  of  the  State  collecting 
it,  Morris  declared  was  a  "  position  unjust  in  itself,"  and 
"  would  forever  prevent  any  duties."  "  Rhode  Island, 
Pennsylvania  and  some  other  States  carry  on  the  com- 
merce of  their  neighbors  as  well  as  their  own,  from  which 
they  derive  great  riches.  ...  If  then  a  considerable  duty 
were  laid  by  the  commercial  State,  it  would  fall  on  its 
uncommercial  neighbor."  What,  then,  would  happen? 
Morris  answers,  "The  neighbor  would  immediately  take 
measures  to  carry  on  its  own  commerce,  and  prohibit  the 
bringing  of  articles  from  the  commercial  State."  Such 
measures,  he  affirms,  would  cause  a  repeal  of  the  duty. 
Concerning  the  fifth  objection,  he  could  hardly  suppose 
the  neighboring  States  would  ever  think  of  laying  duties 
on  produce,  and,  if  they  should  lay  them,  their  own  citi- 
zens would  be  the  worst  sufferers.  Concerning  the  next 
objection,  if  the  article  of  produce  were  left  uncontrolled 
by  the  government,  every  individual  would  be  a  check  on 
the  avidity  of  his  neighbors,  and  if,  by  this  means,  a  piece 
of  American  goods  could  be  vended  cheaper  in  Rhode 
Island  than  a  piece  of  foreign  goods,  the  consumer  there 
by  the  purchase  of  it  would  save  money  to  himself  and 
therefore  to  the  country.  Morris  thought  the  objection 
concerning  the  number  employed  to  collect  duties  would 
apply  more  strongly  to  almost  any  other  kind  of  tax ; 
nor  did  he  believe  that  smuggling  would  become  a  prac- 
tice, because,  if  any  person  were  so  inclined,  detection 
would  be  easy :  moreover,  there  was  no  reason  for  sup- 
posing that  Congress  would  devise  means  for  oppressing 
their  fellow-citizens.  Such,  in  brief,  was  Morris's  answer, 
which  seemed  conclusive;  but  Rhode  Island  refused  to 


1782.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  297 

yield,  and  so  this  well-devised  and  practicable  scheme 
came  to  nought. 

Morris  clearly  perceived  the  weakness  of  the  Articles 
of  Confederation,  from  their  lack  of  obligatory  and  co- 
ercive power  over  the  States.  Writing  to  Greene  1  soon 
after  Rhode  Island's  refusal  to  consent  to  a  Federal  col- 
lection of  taxes  on  imports,  he  says,  with  reference  to  the 
States,  "  At  present  they  content  themselves  with  the 
assertion,  that  each  has  done  most,  and  that  the  people 
are  not  able  to  pay  taxes.  Languor  and  inexertion  are 
the  offspring  of  the  doctrine,  and  finally  the  people  who 
are  said  to  be  incapable  of  bearing  taxation,  actually  pay 
double  the  sum  that  would  be  necessary  in  the  first 
instance.  Nothing  on  my  part  has  been  omitted  that  I 
could  think  of,  to  stimulate  them  to  exertions,  and  I  have 
given  them  every  encouragement  to  support  my  arrange- 
ments, that  could  be  derived  from  regularity,  system  and 
economy ;  but  all  this  does  not  produce  the  effect  it 
ought ;  there  are  in  every  Legislature,  characters  too  full 
of  local  attachments  and  views  to  permit  sufficient  atten- 
tion to  the  general  interest." 

In  no  way  did  the  genius  of  Morris  shine  more  bril- 
liantly than  in  reducing  the  expenses  of  the  government.2 
This  step  seemed  more  necessary  than  ever  after  the 
failure  of  the  plan  to  obtain  a  revenue  from  imports. 
The  economies  introduced  by  him  were  very  numerous  : 
he  totally  destroyed  the  old  system  of  granting  specific 

1  April  24,  1782,  Dip.  Cor.,  vol.  xii.  p.  136. 

2  Reform  in  hospital  department,  see  action  of  Cong.,  July  23,  1782; 
and  in  the  army,  April  8,  10,  22,  23,  Aug.  1,  7,  Sept.  3,  Oct.  23,  29,  Nov. 
12,  Dec.  3,  1782. 


298        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1782. 

supplies,  and  giving  certificates  therefor;  he  vainly  but 
persistently  tried  to  close  the  loan-offices,  and  settle  the 
accounts  of  the  States,  besides  abolishing  numerous 
offices,  and  executing  other  sweeping  reforms,  which  pro- 
voked to  wrath  many  who  impugned  his  motives,  and 
condemned  his  policy.  His  dealings  with  Pickering  show 
how  keenly  Morris  watched  the  business  of  his  depart- 
ment. Pickering  was  quartermaster-general  of  the  army, 
and  Morris  supplied  him  by  weight  with  gold  coins  from 
the  bank  at  Philadelphia.  As  they  were  severally  hea- 
vier than  required  by  law  for  their  current  value,  and  in 
paying  them  by  tale  the  public  would  lose  the  excess  of 
weight,  Morris  required  Pickering  to  reduce  the  coins 
to  the  standard  weight  by  clipping  them,  which  was  to 
be  done  by  himself,  or  at  his  expense.  Of  course,  no 
wrong  to  the  public  was  designed ;  yet  Pickering  re- 
garded this  as  "  harmful  business,"  from  which  he  would 
have  gladly  escaped.  Mr.  Hodgdon,  an  officer  in  the  ord- 
nance department,  wrote  to  him,  "  The  financier  [which 
Morris  was  often  called]  will  not  permit  the  Continent 
to  be  a  loser  by  the  gold,"  continuing  with  instructions 
on  the  mode  of  clipping,  to  which  he  added  the  significant 
fact,  "  The  matter  should  be  kept  a  secret,  as  the  army, 
not  acquainted  with  circumstances,  might  suspect  fraudu- 
lent intentions."  To  which  Pickering  replied,  "'Tis  a 
shameful  business,  and  an  unreasonable  hardship  on  a 
public  officer."  Notwithstanding  the  exercise  of  consid- 
erable care,  Pickering  was  obliged  to  send  gold  to  Phila- 
delphia on  his  own  account,  to  reimburse  the  bank  for  the 
losses  incurred  through  his  imperfect  clipping  of  the  coins.1 

1  Life  of  Pickering,  vol.  i.  p.  3S7. 


1782.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  299 


It  would  require  considerable  space  to  enumerate  all 
the  abuses  which  Morris  discovered  and  corrected.  In  a 
single  day  were  brushed  off  one  hundred  and  forty-six 
supernumerary  officers,  who  for  a  long  period  had  been 
sucking  their  nourishment  from  the  nation.  Expenses 
were  greatly  reduced  in  the  quartermaster's,  commissaries' 
of  provisions  and  military  stores,  in  the  hospital,  and  in 
every  department.  It  is  related  that  an  annual  estimate 
of  one  hundred  and  forty  tons  of  hay  for  a  certain  point 
was  presented  to  him  for  examination.  He  reduced  the 
estimate  to  twelve  tons,  and  even  this  quantity  proved  an 
abundant  supply,  although  the  post  was  fully  and  as 
usefully  occupied  as  it  had  been  during  any  preceding 
period.1 

It  was  too  much  for  human  nature  to  leave  Morris 
wholly  free  from  accusation  and  censure.  Strongly 
intrenched  as  he  was  in  the  confidence  of  Congress,  his 
assailants  outside  were  numerous  and  malignant.  Some 
of  the  charges  against  him  were,  on  one  occasion,2  briefly 
noticed,  and  it  may  be  worth  while  to  lay  them  before  the 
reader.  He  was  charged  with  robbing  the  Eastern  States 
of  their  specie ;  with  showing  partiality  towards  the  dis- 
affected, and  towards  Pennsylvania  also,  because  of  his 
numerous  commercial  relations  with  the  merchants  of 
Philadelphia ;  with  establishing  a  bank  from  sinister  mo- 
tives ;  with  forming  a  league  with  Pennsylvania  to  keep 
Virginia  poor ;  and,  lastly,  in  company  with  the  secretary 
of  Congress  and  another  person,  with  engaging  in  specu- 
lation.   The  first  charge  was  very  easily  answered,  since 

1  Boudinot's  speech  in  Congress,  Ann.  of  Cong.,  vol.  i.  p.  394. 

2  Letter  to  Daniel  Clarke,  May  30,  1782,  Dip.  Cor.,  vol.  xii.  p.  168. 


300        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [17853. 

he  had  received,  at  the  time  these  charges  were  made,  not 
a  shilling  from  any  State.  The  charge  of  partiality  to- 
wards Pennsylvania  was  very  assiduously  circulated  ;  and 
Morris  himself  says  that  it  gained  "an  extensive  cur- 
rency." He  supposed  the  charge  sprung  from  the  fact  of 
his  residence  in  that  State,  as  there  was  no  other  basis 
for  it ;  while  his  partiality  towards  the  disaffected  "  was 
among  those  threadbare  topics  of  defamation,  which  have 
been  so  generally  applied,  that  they  have  lost  their  effect." 
He  confessed  to  establishing  the  bank,  defended  the  act 
as  wise,  and  declared  the  institution  would  "exist  in  spite 
of  calumny,  operate  in  spite  of  opposition,  and  do  good 
in  spite  of  malevolence."  That  Pennsylvania  should 
desire  to  keep  Virginia  poor,  he  thought  was  "  a  strange 
assertion."  He  believed  that  Pennsylvania  would  be 
rich,  as  the  soil  and  climate  were  good,  and  the  people 
quiet  and  industrious.  Their  rulers,  also,  were  sensible 
of  their  true  interests.  "  They  encourage  commerce, 
have  laid  aside  all  the  idle  systems  of  specific  supplies, 
and  content  themselves  with  laying  money  taxes.  .  .  . 
On  the  other  hand,  if  Virginia,  or  any  other  State  be 
poor,  it  must  be  their  own  fault.  Prudence,  diligence, 
and  economy,  promote  national  prosperity;  and  vice, 
indolence,  and  prodigality,  involve  national  ruin.  I  am 
.  so  far  from  wishing  to  impoverish  Virginia,  that  I  have 
constantly  labored,  both  in  my  public  and  private  applica- 
tions, to  bring  about  those  measures  which  are  calculated 
to  make  her  wealthy  and  powerful."  In  respect  to  the 
charge  of  speculating,  it  was  "  one  of  those  foolish  things 
which  are  not  worth  answer."  In  such  a  spirit  and 
manner  did  Morris  answer  these  charges.    Had  not  the 


1782.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  301 

design  in  making  them  been  to  involve  the  national 
interests  committed  to  him,  rather  than  to  injure  himself 
merely,  he  assures  one  of  his  correspondents  that  he 
would  not  have  answered  them.  It  is  highly  probable 
that  the  public  interests  were  not  injured  in  consequence 
of  them,  for  surely  they  were  too  unsubstantial  to  shake 
any  one's  confidence  in  Morris's  ability  or  integrity. 

One  of  the  most  interesting  incidents  in  Morris's  ad- 
ministration related  to  the  coinage.1  Having  been  in- 
structed to  report  a  table  of  rates  at  which  foreign  coins 
should  circulate  in  the  United  States,  he  improved  the 
opportunity  to  set  forth  reasons  for  establishing  a  uniform 
coinage  throughout  the  country.  He  said  the  ideas  an- 
nexed to  a  pound,  a  shilling,  and  a  penny,  which  were 
the  several  kinds  of  money  then  current,  were  almost  as 
various  as  the  States  themselves.  Calculations  were  as 
necessary  for  inland  as  for  foreign  commerce.  The  com- 
monest transactions  grew  intricate  when  money  entered 
into  them.  "  A  farmer  in  New  Hampshire,  for  instance, 
can  readily  form  an  idea  of  a  bushel  of  wheat  in  South 
Carolina,  weighing  sixty  pounds,  and  placed  at  one  hun- 
dred miles  from  Charleston ;  but,  if  he  were  told,  that 
in  such  situation  it  is  worth  twenty-one  shillings  and 
eightpence,  he  would  be  obliged  to  make  many  inquiries, 
and  form  some  calculations  before  he  could  know  that 
this  sum  meant  in  general  what  he  would  call  four  shil- 
lings ;  and  even  then  he  would  have  to  inquire  what 
kind  of  coin  that  four  shillings  was  paid  in,  before  he 
could  estimate  it  in  his  own  mind,  according  to  the 
ideas  of  money,  which  he  had  imbibed."    Surely  there 

1  Letter  to  Pres.  of  Cong.,  Jan.  15,  1782,  Dip.  Cor.,  vol.  xii.  p.  81. 


302        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1782. 

was  need  for  establishing  a  uniform  currency,  when  such 
money  was  in  use.  The  need  was  not  less  pressing  for 
providing  money  which  could  be  employed  as  a  just  legal 
tender. 

The  reasons  for  using  both  gold  and  silver  were  next 
considered.  Morris  favored  the  adoption  of  a  single 
silver  standard.  The  expense  of  coining,  he  maintained, 
ought  to  be  defrayed  by  the  people.  In  order  to  coin 
money  which  should  be  perfectly  intelligible  to  the  whole 
people,  it  was  necessary  to  preserve  an  affinity  to  their 
former  currency.  "  The  purposes  of  commerce  require, 
that  the  lowest  divisible  point  of  money,  or  what  is  more 
properly  called  the  money  unit,  should  be  very  small, 
because  by  that  means,  price  can  be  brought  in  the  small- 
est things  to  bear  a  proportion  to  the  value.  And  al- 
though it  is  not  absolutely  necessary,  yet  it  is  very 
desirable,  that  money  should  be  increased  in  decimal 
ratio,  because  by  that  means  all  calculations  of  interest, 
exchange,  insurance,  and  the  like,  are  rendered  much 
more  simple  and  accurate,  and  of  course,  more  within 
the  power  of  the  great  mass  of  the  people;"  to  which 
he  added  the  very  truthful  observation,  "  Whenever  such 
things  require  much  labor,  time,  and  reflection,  the  greater 
number  who  do  not  know,  are  made  the  dupes  of  the 
smaller  number  who  do." 

The  values  of  all  coins  circulating  in  America,  from 
time  to  time,  had  changed;  and  now,  when  Morris  was 
considering  the  subject  of  coinage,  there  was  no  general 
standard,  unless  it  was  the  Spanish  dollar.  It  passed  in 
Georgia  at  five  shillings,  in  North  Carolina  and  New 
York  at  eight  shillings,  in  Virginia  and  the  four  Eastern 


1782.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  303 

States  at  six  shillings,  and  in  all  the  other  States,  except 
South  Carolina,  at  seven  shillings  and  sixpence,  and  in 
South  Carolina  at  thirty-two  shillings  and  sixpence. 
The  money  unit  of  a  new  coin  which  should  agree, 
without  a  fraction,  with  all  these  different  values  of  a 
dollar,  except  the  last,  would  be  the  fourteen  hundred 
and  fortieth  part  of  a  dollar.  Of  these  units,  twenty- 
four  would  be  equal  to  a  penny  of  Georgia,  fifteen  a 
penny  of  North  Carolina  and  New  York,  twenty  a  penny 
of  Virginia  and  the  four  Eastern  States,  sixteen  a  penny 
of  all  the  other  States  except  South  Carolina,  where 
thirteen  pence  would  be  equal  to  forty-eight  of  the 
proposed  coinage. 

Morris  observed  that  it  was  not  necessary  to  represent 
the  money  unit  by  a  coin :  it  would  be  sufficient  to  as- 
certain its  precise  value.  "  On  the  present  occasion,  two 
copper  coins  will  be  proper,  the  one  of  eight  units  and 
the  other  of  five.  These  may  be  called  an  Eight,  and  a 
Five.  Two  of  the  former  will  make  a  penny  Proclama- 
tion, or  Pennsylvania  money,  and  three  a  penny  Georgia 
money.  Of  the  latter,  three  will  make  a  penny  New 
York  money,  and  four  a  penny  lawful,  or  Virginia  money. 
The  money  unit  will  be  equal  to  a  quarter  of  a  grain  of 
fine  silver  in  coined  money.  Proceeding  thence  in  a 
decimal  ratio,  one  hundred  would  be  the  lowest  silver 
coin,  and  might  be  called  a  Cent.  It  would  contain 
twenty-five  grains  of  fine  silver,  to  which  may  be  added 
two  grains  of  copper,  and  the  whole  would  weigh  one 
pennyweight  and  three  grains.  Five  of  these  would 
make  a  Quint,  or  five  hundred  units,  and  ten  would 
make  a  Mark,  or  one  thousand  units."    Having  estab- 


304        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1783. 

lished  such  a  coin,  the  value  of  all  others  could  be  easily 
ascertained  by  assaying  them  at  the  mint. 

His  plan  evinced  a  mastery  of  the  subject.  He  digged 
to  the  bottom,  and  built  on  the  true  principle,  —  a  decimal 
coinage.  He  was  profoundly  clear  in  devising  a  money 
unit  which  should  disturb  but  slightly  if  possible  former 
modes  of  valuation.  Congress  took  no  action  until  the 
next  year,  when  the  subject  was  discussed,  and  referred  to 
a  committee,  of  which  Jefferson  was  a  member.  He  de- 
clared that  "  the  general  views  of  the  financier  were 
sound,  and  the  principle  was  ingenious  on  which  he  pro- 
posed to  found  his  unit,  but  it  was  too  minute  for  ordinary 
use,  too  laborious  for  computation,  either  by  the  head  or 
in  figures."  Jefferson  proposed,  therefore,  to  adopt  the 
dollar  as  a  unit  of  account  and  payment,  and  that  its 
divisions  and  subdivisions  should  be  in  the  decimal  ratio. 
He  prepared  some  observations  on  the  subject  for  the 
consideration  of  Morris.  The  financier  replied,  still  ad- 
hering to  Iris  scheme,  "  only  agreeing  to  take  for  his  unit 
one  hundred  of  those  he  first  proposed."  To  Morris's 
communication,  Jefferson  wrote  an  answer,  which,  with 
his  earlier  observations,  he  afterward  published,  and 
gave  copies  of  the  work  to  the  members  of  Congress.1 
The  committee  were  persuaded  to  support  Jefferson's 
views ;  and  the  next  year  his  system,  as  he  called  it,  was 
adopted  by  Congress.  It  is  essentially  the  same  system 
as  the  one  now  in  use.  Jefferson  claimed  too  much  credit 
in  devising  the  plan ;  for,  though  it  differed  in  some  re- 
spects from  that  proposed  by  Morris,  the  main  outlines 
1  Jefferson's  Works,  vol.  i.,  Appendix,  Note  F,  p.  103. 


1781.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  305 


were  the  same,  and  these  the  financier  had  sketched.1 
Morris's  system  was  improved  by  Jefferson ;  but  it  cannot 
truthfully  be  said  of  him  that  he  originated  one.2 

As  Morris's  ability  to  provide  means  for  carrying  on 
the  government  became  more  manifest,  new  burdens  were 
imposed  upon  him.  He  was  directed,  not  only  to  procure 
supplies  for  the  army  and  navy,  to  provide  for  the  trans- 
portation of  the  former,  and  to  launch  and  equip  ships 
for  the  latter,  but  also  to  act  as  agent  of  marine,  to  em- 
ploy a  packet  which  should  serve  between  America  and 
Europe,  and  to  do  many  other  difficult  things  outside  the 
sphere  of  his  office.3 

The  reduction  of  all  indebtedness  to  a  specie  valuation 
was  inaugurated  as  one  of  the  features  of  the  financial 
policy  of  the  government  in  1780.  Once  a  month  the 
depreciation  of  the  currency  was  ascertained  by  the 
Board  of  Treasury,  and  payment  was  made  by  the  scale 
of  depreciation  thus  established.4    Morris  was  unceasing 

1  "We  both  agree,"  says  Jefferson  in  his  Supplementary  Explana- 
tions, "that  the  ease  of  adoption  with  the  people,  is  the  thing  to  be 
aimed  at "  in  establishing  a  monetary  unit.  —  Works,  vol.  i.,  Appendix, 
p.  172. 

2  To  Morris's  system  of  coinage,  Gouverneur  Morris  contributed  no 
inconsiderable  part.  Randall,  in  his  Life  of  Jefferson  (vol.  i.  p.  396), 
says  that  Jefferson  and  Morris  "share  in  the  honor  of  founding  a  far 
simpler  and  more  easily  computed  money  system  than  before  existed. 
The  latter,  or  rather  his  assistant,  the  able  Gouverneur  Morris,  is  en- 
titled to  the  credit  of  proposing  the  decimal  system  of  computation,  and 
Jefferson  of  proposing  the  unit  and  present  coinage  of  the  United 
States."  For  an  able  examination  and  criticism  of  the  systems  pro- 
posed by  Morris  and  Jefferson,  see  Sparks' s  Life  of  G.  Morris,  vol.  i.  pp. 
273-281.  An  excellent  sketch  of  the  coinage  of  the  Colonies  may  be 
found  in  Hist.  Mag.,  vol.  i.  p.  225,  and  Ibid.,  p.  297. 

8  June  21,  23,  28,  Sept.  7,  Nov.  27,  Dec.  3,  1781.      4  Aug.  2,  1781. 


306        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1781. 

in  his  efforts  to  settle  the  multitudinous  obligations  of 
the  government;  and  Congress  was  constantly  passing 
resolves  concerning  them.  To  many  obviously  just  claims 
a  great  variety  of  irregularities  attached,  which  could  be 
remedied  only  by  congressional  action.1 

Morris  did  not  dispense  with  the  Board  of  Treasury 
entirely  until  the  20th  of  September,  1781.2  Notwith- 
standing the  incompetency  of  the  members,  due,  in  part, 
to  their  lack  of  ability,  and  partly  to  the  want  of  time 
necessary  to  discharge  their  duties  properly,  the  organiza- 
tion had  been  continued  five  years  during  a  very  critical 
period  of  the  country's  life.  Their  mode  of  conducting 
business  was  exceedingly  slow  and  crude,  and  must  have 
been  often  vexatious  in  the  extreme  to  others.  An 
officer,  while  acting  as  quartermaster-general  of  the 
army,  has  left  an  account  of  the  way  the  board  served 
him  in  his  official  capacity :  "  I  am  obliged  for  every 
demand  upon  me,  however  trifling,  to  frame  an  esti- 
mate and  make  a  special  application;  and  sometimes, 
though  not  commonly,  I  get  some  kind  of  answer  in  the 
course  of  two  or  three  weeks  after  applying.  The  21st 
of  June  I  sent  an  application,  on  the  estimate  of  Colonel 
Cox,  for  drawing  from  the  tradesmen,  and  equipping  the 
new  wagons  he  had  ordered  in  this  State  ;  about  ten 
days  afterwards  I  got  a  warrant  for  the  sum ;  yesterday  I 
got  a  letter  of  advice  from  the  board  to  the  treasurer,  and 
to-day  I  have  got  near  one-fifth  of  the  money.  This 
movement,  slow  as  it  may  seem  .  .  .  has  been  pushed 

1  Letters  and  Reports  of  the  Sup.  of  Finance,  1781-82,  vol.  i.  No. 
137;  Bureau  of  Rolls,  Dep.  of  State,  Wash. 

2  Action  of  Congress  Sept.  11,  1781. 


1781.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  307 

with  uncommon  assiduity  and  with  more  than  common 
success ;  it  is  therefore  one  of  the  most  favorable  speci- 
mens I  can  give  ...  of  the  course  of  business."  1  Con- 
sidering this  as  a  fair  illustration  of  the  slowness  with 
which  the  Treasury  Board  conducted  business,  who  will 
question  the  need  existing  at  that  time  of  putting  a  vast 
deal  more  energy  into  the  financial  department  of  the 
government  ?  In  place  of  the  board,  besides  Morris,  were 
a  comptroller,  treasurer,  register,  auditors,  and  clerks. 
The  comptroller  inspected  and  superintended  the  settle- 
ment of  accounts ;  and  it  was  his  duty  to  see  that  they 
were  expeditiously  and  properly  adjusted,  and  safely  kept. 
He  was  also  vested  with  authority  to  hear  the  appeals  of 
persons  aggrieved  by  the  judgment  of  the  auditor.  The 
treasurer  rendered  quarterly  accounts  to  the  comptroller ; 
and  every  warrant  "  on  the  treasury  or  others  "  was  entered 
and  countersigned  before  making  payment. 

Again  were  the  States  asked  for  eight  million  dollars, 
payable  in  quarterly  payments.2  Notwithstanding  the 
smallness  of  this  requisition,  compared  with  many  former 
ones,  Morris  did  not  indulge  the  vain  hope  of  receiving 
even  so  moderate  a  sum  from  the  States.  "The  great 
arrearage  of  unfunded  debt,  the  cumbrous  load  of  use- 
less paper,  the  multiplied  mass  of  certificates,  the  dis- 
tracted situation  of  the  more  southern  States,  the  ravages 
which  have  been  in  them,  the  total  loss  of  their  com- 
merce, the  real  want  of  coin  in  many  States,  and  the 

1  Letter  from  Charles  Pettit,  acting  quartermaster-general,  July  13, 
1780,  Greene's  Life  of  Greene,  vol.  ii.  p.  313.  See  Ibid.,  pp.  269,  291, 
293;  also  Hamilton's  Hist,  of  Eepub.  vol.  ii.  pp.  92,  93. 

2  Oct.  30,  Nov.  2,  17S1. 


308 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1783. 


equal  want  of  system  in  all;  —  these,  sir,"  he  wrote  in  a 
letter  to  Franklin,1  "are  circumstances,  which  forbid  the 
most  sanguine  temper  to  expect  a  full  compliance."  He 
assured  Franklin  that  he  should  get  what  he  could, 
making  compositions  whenever  these  were  necessary, 
besides  taking  provisions  in  lieu  of  money,  and  resorting 
to  other  similar  expedients.  The  States  were  recom- 
mended2 to  lay  taxes  for  the  collection  of  this  sum,  in- 
stead of  mingling  them  with  the  taxes  laid  for  State 
purposes,  and  to  pass  acts  directing  the  collector  to  pay 
the  same  to  the  commissioners  of  the  loan  offices,  or  to 
any  other  persons  appointed  by  the  superintendent  of 
finance.  This  requisition  encountered  opposition  from 
New  Hampshire.3  This  State  claimed  to  have  only 
eighty-two  thousand  inhabitants ;  but  the  apportionment 
was  based  on  a  higher  estimate.  By  the  Articles  of  Con- 
federation, the  value  of  the  lands  in  each  State  was  to 
form  the  basis  for  apportioning  the  public  burdens,  —  a 
far  more  equitable  basis  than  that  of  population.  Con- 
gress, however,  had  been  unable  to  ascertain  the  value  of 
these :  so  recourse  was  had  to  the  old  expedient  in  appor- 
tioning this  new  assessment,  and  it  was  based  on  popula- 
tion. The  claim  of  New  Hampshire  was  heard  by  Con- 
gress ;  but  the  apportionment  was  not  altered,  because, 
while  the  census  of  population  taken  by  the  State  was 
regarded  as  probably  correct,  the  estimates  of  population 
in  other  States  were,  perhaps,  as  inaccurate,  and  therefore 
it  was  not  clear  that  New  Hampshire  would  suffer  any 
wrong  if  the  apportionment  remained  as  originally  fixed. 

i  Nov.  27,  1781,  Dip.  Cor.,  vol.  xii.  p.  34.      2  Nov.  2,  1781. 
8  April  1,  1782. 


1783.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  309 

All  assessments,  however,  were  to  be  adjusted  at  a  future 
date  upon  a  fair  basis,  and  consequently  New  Hampshire 
would  certainly  not  be  a  loser  in  the  end.  Other  States 
reiterated  the  complaint,  and  justified  themselves  in  not 
contributing,  on  similar  grounds.  During  a  Persian 
invasion  of  Greece,  the  members  of  the  Hellenic  Confed- 
eration appointed  Aristides  to  determine  the  mode  and 
amount  of  their  contributions  to  the  general  fund.  What 
a  pity  that  an  Aristides  did  not  live  during  our  Revolution, 
whose  fairness  and  probity  should  have  caused  his  selec- 
tion to  determine  the  forms,  and  assess  the  amounts,  of 
contribution  ! 

Morris  was  requested  to  furnish  a  statement  of  the 
public  indebtedness  to  the  close  of  the  year  1781,  and 
also  to  prepare  one  semi-annually  of  "all  moneys  bor- 
rowed and  bills  emitted  during  such  periods,"  for  the 
purpose,  more  especially,  of  transmitting  copies  thereof  to 
the  States,  as  required  by  the  Articles  of  Confederation.1 
Requiring  prompt  statements  and  settlements  of  persons 
intrusted  with  the  public  funds,  he  was  not  less  exact 
and  punctual  in  rendering  his  own  account  to  the  govern- 
ment. How  different,  indeed,  was  his  conduct  from  that 
of  the  Treasury  Board,  who  never  rendered  only  partial 
accounts  to  Congress  !  It  was  in  obedience  to  this  re- 
quest, probably,  that  Morris  sent  a  statement,  accom- 
panied with  a  letter  addressed  to  the  president  of  Con- 
gress, on  the  23d  of  May,  in  which  he  remarked  that  it 
would  be  perceived  that  every  sou  which  the  government 
could  command  during  the  year  1782  had  been  already 
anticipated. 

i  April  30,  1782. 


310 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1783. 


The  condition  of  the  treasury  was  extremely  critical. 
"  The  habitual  inattention  of  the  States,"  writes  Morris 
to  the  president  of  Congress,1  "has  reduced  us  to  the 
brink  of  ruin,  and  1  cannot  see  a  probability  of  relief 
from  any  of  them.  I  rather  perceive  a  disposition  to 
take  money  from  the  public  treasury,  than  to  place  any 
in  it.  A  variety  of  causes  prevents  the  collection  of 
taxes,  and  delays  the  payment  of  them,  even  after  they 
are  collected.  In  many  States  they  are  not  laid."  Mor- 
ris had  prepared  a  circular  letter  to  send  to  the  governors 
of  the  States;  but  the  condition  of  the  finances  was  so 
plainly  set  forth,  and  revealed  such  nakedness  and  pov- 
erty, that  he  dared  not  transmit  it  without  the  advice 
and  consent  of  Congress.  He  feared,  that  if  the  commu- 
nication were  sent,  and  it  fell  into  improper  hands,  "  the 
most  dangerous  consequences  "  would  follow.  The  situa- 
tion was  truly  startling,  as  disclosed  in  the  foregoing 
letter  to  the  president ;  for  he  says,  "  the  public  depart- 
ments are  now  absolutely  at  a  stand,  for  the  want  of 
money,  and  many  things  already  commenced  I  must  de- 
sist from.  This  cannot  be  wondered  at,  when  it  is  con- 
sidered, that  near  five  months  of  the  present  year  have 
elapsed  without  my  having  received  any  thing  on  account 
of  its  expenditures,  except  the  trifling  sum  of  five  thou- 
sand five  hundred  dollars,  and  that  sum,  calculating  on 
expenses  at  eight  millions  annually,  is  about  one-fourth 
of  what  is  necessary  to  support  us  for  a  single  day." 

Notwithstanding  the  emptiness  of  the  treasury,  the 
States  contributed  very  feebly  towards  replenishing  it. 
Taxes,  it  is  true,  were  laid,  and  considerable  sums  were 

i  May  17,  1782,  Dip.  Cor.,  vol.  xii.  p.  154. 


1782.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  311 


paid  to  the  States.  Pickering,  writing  to  his  brother 
from  Verplanck's  Point,  says,  "I  was  astonished  at  the 
enormous  amount  of  our  taxes,  which  you  paid  the  last 
year.  If  all  States  paid  in  the  like  proportion,  instead  of 
eight  millions  of  dollars,  the  taxes  would  reach  to  as 
many  pounds,  besides  the  internal  taxes  of  each  State. 
Everybody,  go  where  I  will,  is  complaining  of  the  heavy 
taxes ;  yet  those  paid  the  United  States  are  to  the  last 
degree  insignificant."  Not  infrequently  their  collection 
was  postponed;1  and,  whatever  happened,  the  treasury 
did  not  get  much  from  the  chief  source  whence  aid 
should  have  come.2  Some  believed  that  taxes  could  not 
be  raised,  from  lack  of  specie ;  yet,  as  Morris  wrote  to 
the  governor  of  Maryland,3  nothing  could  be  more  un- 
founded. "  If  the  people  be  put  in  the  necessity  of  pro- 
curing specie  they  will  procure  it.  They  can  if  they 
will.  Tobacco  may  not  sell  at  one  moment,  grain  at 
another,  or  cattle  at  a  third ;  but  there  are  some  articles 
such  as  horses,  which  will  sell  at  all  times.  The  mischief 
is,  that  when  a  purchaser  offers,  the  party  not  being  under 
a  necessity  of  selling,  insists  on  a  higher  price  than  the 
other  can  afford  to  give.    Thus  the  commerce  is  turned 

1  Letter  to  James  Lowell,  July  10,  1782,  Dip.  Cor.,  vol.  xii.  p.  209. 

2  Gen.  Sullivan  wrote  to  Lincoln  from  Boston,  Jan.  16,  1782:  "I  am 
very  sorry  that  a  loan  in  Europe  has  failed,  because  I  can  see  no  way  to 
comply  with  the  requisitions  of  Congress  for  the  million  of  dollars.  A 
tax  of  three  hundred  thousand  pounds  has  been  out  some  time,  and 
very  little  collected.    There  is  another,  lately  assessed,  of  a  like  sum, 

''and  these  I  am  confident  cannot  be  collected  till  midsummer;  and 
really,  sir,  the  farms  where  I  live  would  by  no  means  rent  for  as  much 
as  they  have  been  taxed  the  year  past,  if  taxes  were  as  moderate  as 
they  were  in  1774."  —  Amory's  Life  of  Sullivan,  vol.  ii.  p.  384. 

3  July  29,  1782,  Dip.  Cor.,  vol.  xii.  p.  210. 


312 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1783. 


away  to  another  quarter.  Nothing  but  the  necessity  of 
getting  money  will  bring  men  in  general  to  lower  their 
prices.  When  this  is  done  purchasers  will  offer  in  abun- 
dance, and  thus  it  will  be  found,  that  the  tax  instead  of 
lessening  will  increase  the  quantity  of  specie.  But  so 
long  as  the  want  of  it  can  be  pleaded  successfully  against 
taxes,  so  long  that  want  will  continue." 

While  taxes  were  thus  very  tardily  collected,  and  loans 
were  small  and  infrequent,  there  were  those  who  did  not 
countenance  the  policy  of  sustaining  the  government  by 
means  of  loans.1  It  was  a  new  financial  expedient,  com- 
paratively, in  the  history  of  nations.  One  of  Gerry's 
correspondents  did  not  believe  in  issuing  bills  of  credit, 
and  condemned  the  negotiation  of  loan-office  certificates, 
because  they  produced  the  same  effect  upon  the  currency 
as  the  creation  of  additional  issues.  A  petition  of  re- 
monstrance was  sent  to  Congress  against  contracting 
more  loans,  which  was  referred  to  Morris,  who  subse- 
quently made  an  elaborate  answer  to  it.  It  may  be 
superfluous  to  add  that  his  views  concerning  the  policy 
of  negotiating  loans  were  very  unlike  the  ideas  enter- 
tained by  the  petitioners. 

As  the  income  of  the  government  diminished,  Morris 
was  obliged  to  reduce  expenditures,  and  withdraw  support 
from  many  persons  and  objects  justly  requiring  it.  In- 
spectors of  the  army  were  appointed,2  and  in  every  branch 
of  the  service  large  reductions  in  expenditures  were 
made.  A  commission  was  authorized  to  settle  the  ac- 
counts pending  in  Europe ; 3  while  Morris  never  wearied 

1  See  elaborate  Letter  of  Morris  to  Pres.  of  Congress  on  the  subject, 
Dip.  Cor.,  vol.  xii.  p.  211. 

2  May  0,  1782.      8  May  28,  29,  Nov.  18,  20,  1872. 


1782.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  313 


in  unravelling  those  at  home.1  No  public  officer,  not 
even  Ephialtes,  ever  sought  more  eagerly  to  settle  the 
accounts  of  a  government  than  did  Morris  to  discharge 
the  pecuniary  obligations  of  the  United  States.  Several 
letters  passed  between  the  French  minister  and  the 
financier,  during  the  earlier  days  of  his  administration, 
respecting  the  accounts  between  America  and  France ; 
at  which  time  Morris  claimed  the  debt  due  to  France  to 
be  10,686,109  livres,  while  a  balance  almost  as  large 
remained  subject  to  his  order.2  An  agreement  fixing  the 
amount  was  happily  concluded,  with  the  assistance  of 
Franklin,  in  whose  honesty  and  soundness  of  judgment 
Morris  confidently  relied  in  all  foreign  affairs.3 

In  September,4  Congress  resolved  that  "1,200,000  be 
quotaed  on  the  States  as  absolutely  and  immediately 
necessary  for  payment  of  the  interest  of  the  public 
debt,"  which  was  to  be  applied  in  each  State  in  payment 
of  loan-office  certificates  and  other  obligations  of  the 
United  States  held  there  before  any  portion  fell  into  the 
Federal  treasury.  It  was  recommended  to  raise  this  sum 
in  the  old-fashioned,  perpetually-failing  way  of  taxes. 

The  income  of  the  government  shrank  so  heavily,  that 
Congress  endeavored  to  throw  a  part  of  the  burden  of 
fulfilling  its  obligations  on  the  States.5  Towards  the  close 

1  Ante,  p.  289,  Feb.  20,  27,  1782,  Feb.  10,  17,  1783. 

2  Nov.  22,  1781,  Dip.  Cor.,  vol.  xii.  p.  22.  See  Letter  to  Franklin  on 
same  subject,  Nov.  27,  1781,  Ibid.,  p.  27. 

3  Ante,  p.  244.  *  Sept>  ^  10,  H82. 

5  Nov.  20,  Dec.  10,  1781 ;  see  action  of  Congress,  Sept.  9,  1782.  So 
low  was  the  treasury,  that  in  October,  1782,  Morris  was  obliged  to  sell 
a  portion  of  the  clothing  recently  arrived  from  Europe  for  the  use  of  the 
army  to  pay  debts  for  needlework,  amounting  to  twelve  thousand  dollars. 
—  Waln's  Life  of  Morris,  Biog.  Signers  to  Dec  of  Indep.,  vol.  v.  p.  334. 


314 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1782. 


of  1781,1  the  secretary  of  war  was  directed  to  supply 
North  Carolina  with  arms  and  other  things,  and  charge 
them  to  that  State ;  and,  not  long  after  that  event,  the 
States  were  recommended  "to  settle  and  discharge  on 
account  of  the  United  States  "  the  depreciation  of  pay 
of  certain  officers  who  had  been  confined  to  the  general 
hospital.2  Before  the  year  closed,  the  States  were  recom- 
mended3 to  settle  with  other  officers  and  men,  and  to 
"  charge  the  same  to  the  United  States ; "  and  this  recom- 
mendation was  renewed  the  following  year.  Subsequently 
a  resolution  was  introduced,  asking  the  States  to  assist  in 
paying  the  heavy  arrears  to  the  army;  but  it  was  not 
adopted. 

The  estimates  for  the  year  1783  were  presented  early 
to  Congress  by  Morris,  and  with  some  modification  were 
adopted.4  He  estimated  the  expense  of  the  government 
for  the  year  at  nine  million  dollars,  and  counted  on  ob- 
taining four  million  dollars  from  abroad,  leaving  five 
million  dollars  to  be  raised  at  home.  Congress  added 
another  million  to  the  amount  for  the  States  to  raise, 
and  then  made  a  requisition  for  two  millions  as  a  part 
of  the  sum  required  for  the  year.    This  was  apportioned 


among  them  in 

the  following 

manner :  — 

New  Hampshire  . 

.  880,000 

Delaware 

.  28,000 

Massachusetts 

.  320,000 

Maryland 

.  220,000 

Rhode  Island 

.  48,000 

Virginia 

.  290,000 

Connecticut  . 

.  222,000 

North  Carolina 

.  148,000 

New  York  . 

.  90,000 

South  Carolina 

.  120,000 

New  Jersey  . 

.  110,000 

Georgia 

.  24,000 

Pennsylvania 

.  300,000 

i  Dec.  3.      2  Feb.  20,  1782.  " 

Dec.  31,  1781.  4 

Oct.  16, 18,  1782. 

'      1783.]   FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  315 


It  was  also  "  impressed  on  the  several  States  as  abso- 
lutely necessary  to  lay  taxes  for  raising  their  quotas  of 
money  for  the  United  States,  separately  from  those  laid 
for  their  own  particular  use."  Thus  recommending  by 
Congress  gave  way  to  impressing. 

The  financial  prospect  was  not  promising.  Although 
a  loan  had  been  negotiated  in  Holland  the  previous  year, 
only  six  hundred  thousand  dollars  of  it  remained  for  pay- 
ing the  expenses  of  the  ensuing  year,  nor  was  there  any 
hope  of  procuring  further  pecuniary  aid  from  Europe.1 
There  was  no  other  source  of  revenue,  except  taxation  : 
only  very  small  sums,  however,  were  obtainable  in  this 
way.2  Many  thought  that  new  loans  could  be  negotiated 
with  foreign  countries ;  but  Morris  declared  the  conduct 
of  the  French  court  on  the  subject  to  be  decisive  :  "  Some 
persons  have,  indeed,  flattered  themselves,  that  her  posi- 
tive declarations  were  merely  calculated  to  restrain  our 
rashness,  and  moderate  our  excess,  but  these  ideas  can  no 
longer  have  a  place  in  any  sound  and  discerning  mind. 
Her  conduct  has  been  consistent  with  her  declarations, 
and  if  she  had  ever  so  much  inclination  to  assist  us  with 
money,  it  is  not  in  her  power."  Thus  writes  Morris  to 
the  president  of  Congress,  informing  him,  at  the  same 
time,  there  "  can  no  longer  be  a  doubt  to  Congress  that 
our  public  credit  is  gone." 

Morris,  seeing  the  disinclination  of  the  States  to  pay 
taxes,  and  that  foreign  support  was  well-nigh  exhausted, 

1  Letter  of  Morris  to  Pres.  of  Cong.,  March  7,  1783,  Dip.  Cor.,  vol. 
xii.  p.  341. 

2  Morris  in  a  letter  to  Hamilton  says,  with  reference  to  the  inclina- 
tion of  the  farmers  to  pay  taxes,  "  that  is  an  object  they  are  not 
very  violently  devoted  to."  —  Oct.  5,  1782,  Dip.  Cor.,  vol.  xii.  p.  277. 


316        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1783. 


continued  to  pare  down  the  expenses  of  the  government 
to  the  lowest  possible  limit.  As  soon  as  peace  was 
declared,  he  favored  the  immediate  disbanding  of  the 
army ;  but  there  was  considerable  opposition  to  the  meas- 
ure until  the  troops  were  paid.1  The  arrears  were  heavy, 
notwithstanding  the  strenuous  efforts  put  forth  on  their 
behalf  by  Morris,  who,  more  than  once,  had  employed 
his  own  private  credit  to  relieve  them.  Congress  pro- 
posed that  the  States  should  pay  the  deficiency  to  the 
1st  of  August,  1780,  and  directed  the  financier  to  take 
the  necessary  steps  for  effecting  a  settlement  from  that 
period.  But  the  treasury  was  extremely  low,  and  he 
assured  Congress  that  it  was  impracticable  to  make  any 
payment  to  the  army  unless  the  expenditures  were  "  im- 
mediately and  considerably  reduced."  He  succeeded  in 
paying  them  in  specie  for  one  month's  service,  and  gave 
them  his  own  note  for  three  months'  pay,  payable  six 
months  from  date.  In  six  days  Morris  signed  six  thou- 
sand notes,  besides  transacting  other  business  pertaining 
to  his  office.  The  amount  of  notes  was  seven  hundred 
and  fifty  thousand  dollars,  which  he  expected  to  redeem 
principally  from  the  receipts  of  sales  of  public  property, 
and  from  taxes.  From  time  to  time,  numerous  furloughs 
were  granted,  and  the  organization  melted  away,  and  was 

1  Letter  to  Com.  of  Cong.,  May  15,  1783,  Dip.  Cor.,  vol.  xii.  p.  362. 
It  is  said  that  when  Morris  first  paid  the  soldiers  with  hard  money  at  the 
head  of  the  Elk  River,  just  before  embarking  for  Yorktown,  the  heads 
of  the  kegs  containing  the  half-crowns  were  knocked  out  for  effect,  and 
the  specie  rolled  out,  to  the  great  joy  and  astonishment  of  the  soldiers. 
So  excited  were  they,  that  one  of  them  shouted  to  the  top  of  his  voice, 
"Look!  look!  Jonathan!  by  jingo!  it  is  hard  money." — American  Re- 
view, vol.  vi.  p.  76. 


1783.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  317 


absorbed,  without  any  evil  consequences.  Poorly  paid  as 
the  troops  had  been,  they  separated  not  without  reluc- 
tance ;  for  they  had  grown  old  in  the  service,  and  many 
knew  not  where  to  go  to  earn  a  livelihood.1  Congress 
seconded  the  efforts  of  Morris  to  reduce  expenditures  in 
all  departments,  and  radical  retrenchment  was  vigorously 
enforced. 

The  public  debt  to  the  1st  of  January,  1783,  was 
842,000,375,  of  which  sum,  17,885,088  were  foreign  debt ; 
while  the  balance,  $34,115,290,  was  owed  at  home.  The 
amount  of  domestic  debt  as  given  by  Morris  to  the 
president  of  Congress  was  $35,327,769.  Of  this  sum, 
$11,463,802  were  loan  certificates  with  two  years'  interest 
due  thereon,  which  amounted  to  $877,828  ;  the  army  debt 
was  $635,618;  while  other  unliquidated  debts,  deficien- 
cies, &c,  composed  the  balance,  a  large  part  of  which  was 
interest.  The  foreign  debt  drew  four  and  five  per  cent, 
and  the  domestic  debt  one  per  cent  more.2 

The  most  important  financial  measure  which  now  tasked 
the  wisdom  of  Congress  related  to  the  funding  of  the 
public  debt.   Morris3  had  long  before  directed  their  atten- 

1  See  Morris's  Cor.,  Dip.  Cor.,  vol.  xii.  pp.  362,  380,  especially  Letter 
directed  to  Pres.  of  Congress,  July  18,  1783,  reviewing  the  whole  sub- 
ject. Action  of  Cong.  Jan.  25,  March  18,  22,  May  12,  June  19,  July  4, 
11,  Sept.  18,  1783. 

2  April  24,  29,  1783.  These  figures  represented  the  amount  of  the 
debt  reduced  to  a  specie  standard.  The  amount  of  no  item  in  the 
domestic  debt  is  stated  with  exactness.  With  respect  to  the  unliquidated 
portion,  Morris  says,  "From  the  want  of  materials  it  is  not  possible  even 
to  conjecture  with  any  degree  of  probability  the  amount." 

8  See  elaborate  Letter  to  Pres.  of  Congress  July  29,  1782,  Dip.  Cor., 
vol.  xii.  p.  211.  In  order  to  discharge  the  debt,  Morris  recommended  a 
five  per  cent  tax  on  imports,  a  land-tax  of  one  dollar  on  a  hundred  acres, 
a  one-dollar  poll-tax  on  freemen,  and  an  excise-tax  on  distilled  spirituous 
liquors.  * 


318        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1783. 

tion  to  the  matter;  but  1782  was  closing  when  Congress 
resolved,1  that  "  whenever  the  net  produce  of  any  funds 
recommended  by  Congress  and  granted  by  the  States,  for 
funding  the  debt  already  contracted,  or  for  procuring 
future  loans  for  the  support  of  the  war,  shall  exceed  the 
sum  requisite  for  paying  the  interest  of  the  whole  amount 
of  the  national  debt,  which  these  States  may  owe  at  the 
termination  of  the  present  war,  the  surplus  of  such  grants 
shall  form  a  sinking  fund,  to  be  inviolably  appropriated 
to  the  payment  of  the  principal  of  the  said  debt,  and 
shall  on  no  account  be  directed  to  any  other  purpose." 2 
This  measure,  however,  did  not  go  far  enough.  Ac- 
cordingly, another  bill  was  debated  at  considerable  length ; 
and  on  the  18th  of  April  the  following  year,  Congress 
resolved  to  levy  a  specific  tax  upon  spirituous  liquors, 
tea,  sugar,  coffee,  cocoa,  and  molasses,  and  an  ad  valorem 
duty  of  five  per  cent  on  the  value  of  all  other  importa- 
tions. The  collectors  were  to  be  appointed  by  the  States ; 
and  the  duties,  which  were  not  collectible  for  a  longer 
period  than  twenty-five  years,  were  to  be  applied  towards 
the  discharge  of  the  principal  and  interest  of  the  public 
debt.  One  million  and  a  half  dollars  were  to  be  raised 
annually  for  this  purpose ;  the  proportions  were  assessed 
to  the  several  States ;  and  it  was  provided,  that,  if  the 
duties  collected  in  any  State  exceeded  its  assessment, 
the  excess  was  to  be  refunded ;  and,  if  a  deficiency  oc- 

1  Dec.  16. 

2  Congress  had  indeed  resolved,  on  the  22d  of  May,  1781,  that  "the 
whole  debts  already  due  by  the  United  States,  be  liquidated  as  soon  as 
may  be  to  their  specie  value,  and  funded,  if  agreeable  to  the  creditors, 
as  a  loan  upon  interest;"  but  no  measures  were  taken  for  putting  the 
Act  in  operation. 


1783.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  319 

curred,  the  balance  was  to  be  paid  in  cash.  The  reve- 
nues collected  in  each  State  were  to  form  a  separate 
account,  and  Congress  hoped  that  this  resolve  would  be 
satisfactory  to  Rhode  Island,  as  it  was  formed  with  the 
view  of  meeting  the  principal  objections  urged  by  that 
State  against  the  former  resolution  relating  to  the  taxa- 
tion of  imports.  All  the  delegates  voted  in  the  affirma- 
tive, except  the  representatives  of  New  York,  who  were 
divided,  and  the  delegates  from  Rhode  Island,  both  of 
whom  voted  no.  The  Act,  however,  met  the  same  fate 
as  its  predecessor,  for  Rhode  Island  refused  to  accept  it; 
and  so  it  never  took  effect.  Several  of  the  States  —  Con- 
necticut, New  York,  Virginia,  and  Massachusetts  —  ceded 
their  claims  to  Western  territory,  the  income  from  the 
sale  of  which  was  set  apart  as  a  fund  to  pay  the  public 
debts.1 

Although  steps  had  been  taken  to  settle  the  accounts 
of  the  States,  progress  in  this  direction  was  exceedingly 
slow.  Congress  urged  the  States  to  press  forward  this 
business,2  and  so  did  Morris,  who  was  equally  desirous  of 
having  the  claims  of  persons  residing  in  Canada,  who 
had  furnished  assistance  to  the  United  States  during  the 
war,  ascertained;  and  he  recommended  the  appointment 
of  a  commissioner  to  visit  that  country,  with  power  to 
liquidate  these  obligations,  and  give  certificates  for  the 
amount  payable  at  some  future  time.3 

So  slowly,  indeed,  did  Congress  move  in  this  important 

1  See  action  of  Congress,  Feb.  18,  20,  21,  March  20,  21,  28,  April  1, 
18,  24,  1783. 

2  Feb.  27,  Aug.  9,  11,  1783. 

8  Letter  to  Pres.  of  Cong.,  Jan.  24,  1784,  Dip.  Cor.,  vol.  xii.  p.  449. 


320        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1783. 

business,  that  in  August,  1782,  a  memorial  was  addressed 
to  that  body,  signed  by  many  citizens  of  Pennsylvania, 
complaining  of  their  inability  to  "  obtain  payment  of  the 
debts  due  to  them  by  the  public,"  of  their  failure  to 
receive  interest  on  loan-office  certificates,  "and  that  the 
suspension  of  debts  complained  of,  was  a  material  impedi- 
ment to  the  collection  of  taxes."  The  action  of  Congress 
upon  this  memorial  was  characteristic  of  that  body.  Not 
until  the  last  of  January  1  the  following  year  was  a  reply 
made,  though  an  answer  equally  explicit  could  have  been 
given  at  an  earlier  period.  Congress  declared  that  pro- 
vision had  been  made  for  settling  the  accounts  of  the 
States  with  the  General  Government,  and  that  "  the  plan 
adopted  will  speedily  be  in  an  effectual  train  of  execution 
throughout  the  United  States ; "  but  how  could  payment 
of  them  be  made,  it  was  urged,  unless  the  States  con- 
tributed funds  necessary  for  the  purpose  ?  Congress,  the 
last  of  October  the  previous  year,  had  demanded  of 
the  States  eight  million  dollars ;  yet  of  this  sum  only 
$420,031  had  been  received.  The  attempt  to  raise  a  reve- 
nue on  importations  had  signally  failed,  although  every 
effort  had  been  put  forth  to  obtain  the  consent  of  the 
States  to  the  collection  of  it.  Surely,  how  could  the 
people,  so  long  as  they  withheld  the  funds  needed  to  dis- 
charge the  obligations  of  the  government,  expect  it  could 
fulfil  them? 

Towards  the  close  of  October,  Morris  reported  the 
amount  of  public  indebtedness.2  Congress  was  very  tardy 
in  replying  to  his  letter  asking  for  advice  concerning  the 
answer  he  should  make  to  the  farmers-general  of  France, 

1  Jan.  30.  2  Oct.  22,  1783. 


1784.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  321 


who  had  failed  to  receive  the  interest  due  on  their  loans 
to  the  United  States.  Morris's  communication  was  sent 
to  Congress  in  September ;  but  two  months  elapsed  before 
a  reply  was  received.1  The  answer  which  Morris  was 
advised  to  send  could  not  have  been  very  satisfactory  to 
the  farmers-general.  But  perhaps  it  was  not  unexpected ; 
for,  besides  setting  forth  the  fact  that  Congress  fully 
appreciated  the  favors  received,  that  body  promised  to 
discharge  all  obligations  of  the  government  as  soon  as 
circumstances  would  admit. 

The  estimates  for  1784  were  not  issued  until  the  first 
quarter  of  the  year  had  passed  away ; 2  yet  there  was  not 
much  reason  for  issuing  them  at  all,  since  the  States  were 
so  feeble  in  responding  to  the  requisitions  of  Congress. 
The  entire  sum  wanted  was  less  than  six  million  dollars ; 
while  the  amount  required  for  maintaining  the  govern- 
ment, excluding  the  payment  of  former  claims,  and  of 
the  interest  and  principal  of  the  public  debt,  fell  below 
half  a  million  dollars.  The  figures  are  full  of  interest, 
especially  in  contrast  with  those  for  maintaining  the 
government  at  the  present  day.  Thus  there  was  wanted 
for,  — 

Civil  Department  $107,525  33 

Military  Department   200,000  00 

Marine  Department   30,000  00 

Incidental  expenses   60,000  00 

Contingencies   60,000  00 

$457,525  33 

Instead  of  making  new  requisitions  on  the  States,  Con- 
gress demanded  the  payment  of  taxes  due  on  former  calls, 

1  Nov.  1,  1783.  2  April  5 


322 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1784. 


especially  on  the  eight-million  assessment  of  1781.  Less 
than  one-quarter  thereof  had  been  paid;  and  Congress 
asked  the  States  to  furnish  one-half  the  amount,  or  four 
million  dollars,  during  the  year.  The  following  table 
shows  how  the  original  assessment  had  been  apportioned, 
and  what  sums  the  States  had  paid  to  the  end  of  1783 :  — 


ASSESSMENT. 

am't  paid. 

New  Hampshire  . 

.  $373,598 

$3,000  00 

Massachusetts 

.  1,307,596 

247,676  66 

Rhode  Island 

.       .  216,684 

67.847  95 

Connecticut  . 

747,196 

131,577  83 

New  York  . 

373,598 

39,064  01 

New  Jersey  . 

485,679 

102,004  95 

Pennsylvania 

.  1,120,794 

346,632  98 

Delaware 

112,085 

Maryland 

993,996 

89,302  11 

Virginia 

.  1,307,594 

116,103  53 

North  Carolina 

622,677 

South  Carolina 

.  373,598 

344,301  57 

Georgia 

24,905 

$8,000,000  $1,486,154  71 


A  new  feature  was  now  introduced  in  the  payment  of 
taxes,  worthy  of  notice.  We  have  already  adverted  to 
the  fact,  that,  when  the  government  ceased  to  pay  interest 
on  the  loan-office  certificates,  the  practice  was  initiated, 
by  the  loan-officers  themselves,  of  giving  certificates  for 
interest  due  on  the  loan-office  certificates,  which  were 
called  indents.  Although  Morris  was  opposed  to  issuing 
them,  the  practice  was  continued,  until  they  became  so 
numerous  that  Congress,  in  April,1  1784,  determined  that 
one-fourth  of  the  sum  required  of  the  States  might  be 


i  April  28. 


1784.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  323 

paid  in  indents.  The  committee  who  reported  this  meas- 
ure to  Congress  observed  that  three-fourths  of  the  sum 
wanted  by  the  government  could  "  be  answered  by  noth- 
ing but  money  itself ;  "  but  the  other  fourth,  consisting  of 
interest  due  on  the  domestic  debt,  might  be  effected  "  by 
procuring  a  discount  of  the  demand  in  the  hands  of  the 
holders;  an  operation  which  will  be  shorter,  and  less 
impoverishing  to  the  State."  In  times  of  greater  plenty, 
it  was  admitted,  "the  accuracy  of  fiscal  administration 
might  require  all  transactions  to  be  in  actual  money,  at 
the  treasury  itself,"  yet,  till  the  people  had  had  some 
respite  from  their  late  difficulties,  it  behooved  Congress 
"to  prefer  their  easements."  The  committee,  therefore, 
were  of  the  opinion  that  the  several  Legislatures  might 
be  allowed  "  so  to  model  the  collection  of  the  sums  now 
called  for,"  that  three-fourths  of  any  sum  might  be  paid 
in  money,  and  the  other  fourth  discharged  by  procuring 
"  discounts  of  interest "  with  domestic  creditors,  "  always 
taking  care  that  the  collection  of  money  shall  proceed 
at  least  in  threefold  proportion  with  the  operations  of 
discount."  To  ascertain  the  evidences  of  discount  re- 
ceivable in  lieu  of  money,  the  holders  of  loan-office  cer- 
tificates were  at  liberty  to  carry  them  to  the  office  where 
they  were  issued,  as  well  as  the  holders  of  certificates  of 
other  liquidated  debts  of  the  United  States,  and  have  the 
interest  due  thereon  settled  and  certified  to  the  last  day 
of  the  year  1782,  and  receive  certificates  therefor.  Such 
a  certificate  or  indent,  when  "  parted  with  by  the  holder 
of  the  principal,"  was  regarded  as  evidence  that  he  had 
received  satisfaction  for  the  same,  and  therefore  was 
"receivable  from  the  bearer,  within  the  same  State,  and 


324        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1784. 


from  the  State  where  obtained  from  the  bearer,  in  lieu 
of  money ; "  while  payment  of  indents  by  a  State  into 
the  public  treasury  was  regarded  as  a  discharge  of  an 
equal  amount  of  the  interest  of  the  domestic  debt.  More 
briefly  stated,  the  operation  consisted :  first,  in  giving 
certificates  for  interest  due  on  public  obligations;  sec- 
ondly, allowing  the  people  to  return  them,  in  lieu  of 
money,  in  payment  of  taxes  to  a  limited  extent;  while 
new  certificates  were  issued  for  the  interest  constantly 
accruing. 

Victory  was  won,  and  peace  had  been  declared,  still 
the  people  continued  not  less  remiss  in  paying  taxes.1 
All  willingly  admitted  the  necessity  of  taxation  to  a 
certain  extent;  yet,  as  Morris  writes  to  Franklin,  each 
was  desirous  of  shifting  the  burden  from  his  own  shoul- 
ders to  those  of  his  neighbors. 

A  very  fair  picture  of  the  conditions  of  the  finances  at 
the  opening  of  1784  is  presented  in  Morris's  letter  to 
Franklin,2  written  in  February.  The  accounts  on  the 
first  of  that  month  were  thus  stated  :  — 

Balance  due  for  past  services       ....  $100,000 

Dues  for  bills  of  exchange  drawn ....  200,000 

Due  to  the  National  Bank   340,000 

Add  for  contingencies   10,000 

$650,000 

What  were  his  expectations  about  paying  this  sum? 
The  taxes  for  the  last  four  months  had  slightly  exceeded 
two  hundred  thousand  dollars.    Delaware,  North  Caro- 

1  Letter  to  Franklin,  Sept.  30,  1783,  Dip.  Cor.,  vol.  xii.  p.  417. 

2  Feb.  13,  1784,  Dip.  Cor.,  vol.  xii.  p.  464. 


1784.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  325 

lina,  and  Georgia  had  paid  nothing.  New  Hampshire, 
Connecticut,  New  York,  Maryland,  and  Virginia  had  paid 
very  little  in  proportion  to  their  ability.  Morris  expected 
to  get  two  hundred  and  fifty  thousand  dollars  from  the 
sale  of  confiscated  lands  by  the  last  of  September.  The 
taxes  for  February  and  March  would  yield  enough  to 
discharge  the  first  item,  leaving  four  hundred  thousand 
dollars  unpaid.  This  sum  he  hoped  to  obtain  in  the  fol- 
lowing manner :  "  I  shall  borrow  immediately  one  hun- 
dred thousand  dollars  of  the  bank,  and  direct  purchases 
of  tobacco  and  rice,  partly  with  cash,  partly  on  credit, 
and  partly  by  bills  drawn  on  me.  By  this  means,  I  can, 
with  that  one  hundred  thousand  dollars,  have  the  pur- 
chases all  made  in  March  and  April,  so  that  the  ship- 
ments to  the  required  amount  of  two  hundred  thousand 
dollars  will  take  place,  some  in  March,  some  in  April,  and 
all  of  them  I  hope  by  the  end  of  May.  The  taxes  during 
April  and  May  will  pay  the  purchases  on  credit,  and  the 
bills  drawn  on  me ;  and  the  taxes  in  June  and  July  will 
pay  the  hundred  thousand  dollars  due  to  the  bank.  By 
the  end  of  September,  therefore,  I  may  calculate  upon  a 
full  discharge  of  all  these  debts."  To  what  expedients 
was  Morris  obliged  to  resort  for  the  purpose  of  getting 
so  small  a  sum  with  which  to  pay  the  public  indebted- 
ness !  and  how  precarious  were  all  the  sources  of  revenue ! 
Only  by  exercising  the  utmost  watchfulness  and  vigilance 
were  any  funds  obtained.  A  financier  less  fertile  in  ex- 
pedients than  Morris  would  have  collected  nothing. 

Jefferson  imagined  the  assistance  needed  by  the  gov- 
ernment could  be  procured  from  the  banks :  like  most  of 
his  ideas  on  finance,  his  plan  was  impracticable.    Morris 1 
1  April  8,  1784,  Dip.  Cor.,  vol.  xii.  p.  486. 


326        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1784. 


declared  they  would  not  grant  any  loans  unless  they 
could  clearly  see  "  a  prospect  of  speedy  re-imbursement 
from  the  taxes,"  and,  if  they  were  collectible,  surely  there 
was  no  need  of  asking  the  banks  for  any  aid  whatever. 

Notwithstanding  the  poverty  of  the  treasury,  specie 
was  abundant  among  the  people : 1  the  foreign  armies  had 
brought  large  quantities  into  the  country,  while  foreign 
loans  and  trade  had  largely  added  to  the  stock  of  gold  and 
silver.2  Bills  on  Europe  were  currently  sold  at  twenty 
to  forty  per  cent  below  par,  —  a  rate  so  favorable  to  the 
merchants,  that  they  purchased  bills,  and  remitted  them 

1  Lord  Sheffield,  in  his  Additional  Notes  to  his  work  on  Observations 
on  American  Commerce,  discusses  in  a  very  intelligent  manner  the 
question,  What  had  become  of  the  money  sent  to  America  during  the 
war?  The  question  is  not  without  interest  to  the  present  reader:  so 
we  venture  to  give  the  noble  author's  observations  on  the  subject. 
"Some  is  come  back  —  a  considerable  part  is  the  circulating  cash 
within  our  lines  —  Many  British  subjects  in  New  York  have  very  large 
sums  in  their  possession.  The  Dutch  and  Germans,  whose  number  is 
not  intjonsiderable,  have  hoarded  up  —  and  it  is  believed  considerable 
sums  are  concealed.  Part  went  into  the  country  for  provisions,  much 
provisions  could  not  be  brought  in  clandestinely,  and  the  greatest  part 
of  the  money  came  back  to  New  York,  to  purchase  British  goods,  or  to 
purchase  bills  of  exchange,  which  were  sent  in  payment  to  Europe  and 
the  West  Indies.  Money  to  a  considerable  amount  came  also  to  New 
York  for  the  same  purposes  from  Philadelphia,  got  by  a  very  advanta- 
geous trade  to  the  Havanna,  which  is  now  at  an  end.  And  much 
money  went  from  Philadelphia,  and  other  parts  of  the  American  States 
to  St.  Eustatia  before  it  was  taken,  to  purchase  our  manufactures  from 
the  Dutch;  so  that  it  is  not  probable,  much  specie  will  remain  in 
America  in  consequence  of  the  war."  — P.  68. 

8  Thomas  Paine  wrote  in  April,  1782,  "The  progress  and  revolution 
of  our  domestic  circumstances  are  as  extraordinary  as  the  Revolution 
itself.  We  began  with  paper,  and  we  end  with  gold  and  silver."  — 
Penn.  Packet,  April  4,  1782. 


1784.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  327 

to  Europe  in  payment  of  imports,  which  flowed  into  the 
country  in  great  quantities.1  War-freight  and  insurance 
added  very  considerably  to  the  expense  of  importation; 
yet,  owing  to  the  scarcity  of  foreign  goods,  the  abundance 
of  cash,  and  the  luxury  and  pride  of  the  people,  they  sold 
rapidly,  and  large  profits  were  acquired. 

In  June,2  1784,  Congress  passed  a  noteworthy  Act 
relating  to  the  settlement  of  the  accounts  of  the  States. 
Money  and  supplies  furnished  by  the  United  States  to 
any  State  were  to  be  charged  at  their  just  value  in  specie, 
with  six  per  cent  interest  from  the  date  of  furnishing  the 
same,  until  a  final  adjustment  and  payment  of  the  ac- 
count ;  while  the  same  rule  was  to  be  applied  in  all  trans- 
actions between  the  State  and  the  government  in  which 
the  latter  was  the  debtor.  A  rule  was  established  for 
charging  the  depreciation  of  bills  of  credit  advanced  by 
any  State  or  person  for  the  benefit  of  the  government. 
The  kind  of  evidence  required  to  establish  claims  against 
the  government  was  prescribed,  and  when  compensation 
should  be  allowed  for  the  ravages  of  war,  beside  other 
very  important  regulations.  Certificates  bearing  six  per 
cent  interest  were  given  to  all  creditors  in  payment  of 
their  claims;  while  those  issued  by  any  commissary  or 
quartermaster-general  were  exchangeable  for  new  ones, 
the  same  as  were  given  to  other  creditors.  They  were 
worth  about  two  shillings  and  sixpence  per  pound,  at 

1  "  Thirty  per  cent  is  made  on  the  purchase  of  French  bills,  when 
money  at  lawful  interest  cannot  be  hired  by  public  or  private  bodies." 
—  Gen.  Sullivan  to  Lincoln,  Jan.  16,  1782;  Amoby's  Life  of  Sullivan, 
vol.  ii.  p.  384. 

2  June  3. 


328        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1784. 


which  price,  says  Webster,  their  circulation  "  became  very 
general." 

The  end  of  Morris's  career  as  superintendent  of  finance 
was  drawing  near.  Several  months  before,  he  did  resign, 
but,  yielding  to  the  earnest  solicitations  of  Congress, 
remained  in  office.  His  strict  integrity,  devotion  to  busi- 
ness, and  constant  urging  of  all  delinquents  to  settle  their 
accounts,  yielded  fruit  both  sweet  and  bitter;  for  while 
he  enjoyed,  on  the  one  hand,  the  serene  satisfaction  which 
always  comes  from  a  faithful  performance  of  duty  and 
from  the  thousand  good  opinions  of  those  who  love  their 
country,  on  the  other  hand,  he  could  not  escape  the  con- 
demnation of  those  who  felt  the  pressure  of  his  vigorous 
administration.  His  desire  to  reduce  expenses  was  in- 
spired by  the  mean  wish,  so  it  was  asserted,  of  impairing 
the  strength,  and  lessening  the  respectability,  of  the  coun- 
try. His  enemies  accused  him  of  speculating  in  the  funds 
of  the  government;  but  he  stoutly  denied  the  charge. 
He  was  accused  of  ruining  the  public  credit ;  but  this  ac- 
cusation was  groundless.  During  his  administration  the 
public  finances  had  been  much  improved,  and  the  credit 
of  the  government  had  been  considerably  strengthened. 

The  belief  of  Congress  in  his  integrity  and  ability  was 
never  shaken  by  any  reports  circulated  about  him.  A 
year  previous  to  his  resignation,  a  committee  were  ap- 
pointed to  examine  all  matters  concerning  the  administra- 
tion of  his  office,  who  made  a  report  which  was  entered 
on  the  journal  of  Congress.1    They  declared  that  the 

1  June  17,  1783.  The  committee  reported  that  the  sum  expended 
under  his  administration  from  the  fourteenth  day  of  May,  1781,  to  the 
1st  of  January,  1783,  amounted  to  $3,131,010;  amount  brought  into  the 


1784.]  FINANCIAL  ADMINISTRATION  OF  ROBERT  MORRIS.  329 


business  of  the  office  had  been  conducted  with  great 
ability  and  assiduity,  in  a  manner  highly  advantageous  to 
the  United  States,  and  in  conformity  with  the  system 
established  by  Congress.  The  public  accounts  of  receipts 
and  expenditures  had  been  regularly  and  punctually  kept, 
which  had  never  been  done  previous  to  his  administra- 
tion. Morris  had  settled  many  accounts  that  were  several 
years  old  when  he  accepted  office,  and  most  all  others 
were  in  course  of  adjustment.  Many  reforms  also  had 
been  introduced,  effecting  large  reductions  in  expense, 
preventing  corruption,  and  lessening  the  liabilities  of  the 
government.  Surely  this  was  commendation  enough, 
especially  from  a  body  possessing  such  an  exalted  char- 
acter.1 

Morris's  own  notes,  given  to  a  large  amount  for  the 

benefit  of  the  government,  were  in  due  time  redeemed, 

and  every  obligation  which  he  had  assumed  was  fulfilled. 

No  person  was  ever  more  punctual  or  scrupulous  in 

executing  his  promises  than  Morris,  or  entertained  loftier 

ideas  concerning  the  sacredness  of  public  obligations.  In 

one  of  his  last  official  letters,  addressed  to  the  president 

of  Congress,2  he  says,  "I  have  invariably  in  my  official 

correspondence  (as  indeed  upon  every  other  occasion, 

public  treasury  during  the  same  period  was  $2,726,334  5  and  that  the  ex- 
penditures in  1782  exceeded  the  receipts  to  the  extent  of  $404,713,  which 
sum  "  was  supplied  by  a  circulation  in  the  notes  of  the  financier." 

1  H.  G.  Otis,  in  a  letter  written  in  1857,  containing* reminiscences  of 
John  Lowell,  says,  that  when  Lowell  visited  Philadelphia,  after  the  Rev- 
olution was  over,  "among  others,  he  was  waited  upon  by  Robert  Morris, 
who  was  still  in  his  glory,  and  regarded  in  public  estimation,  next  to 
Washington,  as  the  man  on  whose  financial  exertions  had  depended  the 
success  of  the  Revolution."  —Hist.  Mag.,  vol.  i.  p.  262. 

2  Sept.  30,  1784,  Dip.  Cor.,  vol.  xii.  p.  497. 


330        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1784. 

both  public  and  private),  expressed  the  conviction  which 
I  feel,  that  however  the  several  States  may,  from  a  dif- 
ference in  local  circumstances,  differ  in  their  opinions 
about  the  mode  of  providing  for  public  debts,  all  of  them 
will  concur  in  the  just  sentiment,  that  these  debts  ought 
to  be  most  punctually  discharged." 

The  breadth  and  soundness  of  Morris's  financial  views 
were  remarkable ;  and  only  one  other  person  during  this 
period  displayed  an  insight  in  these  things  equally  clear 
and  deep,  namely,  Alexander  Hamilton.  In  the  same 
letter  from  which  we  have  just  quoted,  Morris  declares 
himself  to  be  "grounded  in  the  assertion"  that  when 
proper  provision  is  made  for  the  payment  of  the  public 
debt,  "the  public  credit  of  America  will  be  the  best  of 
any  in  the  world,  that  it  will  cost  less  to  maintain  it  by 
us,  than  by  any  other  nation,  and  that  considering  the 
infant  state  of  our  cultivation  in  general,  and  the  fron- 
tiers in  particular,  it  is  of  more  importance  to  us  than  it 
can  be  to  any  other  country.  It  is  also  a  commercial 
problem,  which  admits  of  absolute  demonstration,  that 
the  punctual  payment  of  interest  on  all  our  debts  will 
produce  a  clear  annual  gain  of  more  than  such  interest 
can  possibly  amount  to.  So  that  the  eternal  and  immuta- 
ble principles  of  truth  and  justice,  being  for  a  moment 
out  of  the  question,  and  stifling  those  sentiments  of 
humanity,  which  arise  from  a  view  of  what  the  public 
creditors  must  suffer,  should  their  dues  be  withheld  (if 
indeed  it  be  possible  to  stifle  such  sentiments),  still  it 
will  indisputably  appear  to  be  the  interest  of  the  mer- 
chant as  well  as  of  the  husbandman  and  mechanic,  to  pay 
their  just  proportions  towards  discharging  the  public  en- 


1784.]         FINANCIAL  ADDRESS  OF  ROBERT  MORRIS.  331 


gagements.  For  this  plain  and  simple  system  of  common 
honesty,  while  it  invigorates  the  springs  of  our  credit, 
strengthens  also  the  bands  of  our  union,  proceeding  with 
equal  motion  towards  the  public  weal  and  private  pros- 
perity." Thus  did  Morris,  in  his  closing  advice  to  Con- 
gress, show  how  harmonious  were  the  teachings  of  policy 
and  honesty  in  respect  to  one  of  the  gravest  questions  of 
his  time.  Nor  did  he,  on  any  other  occasion  during  his 
financial  career,  display  a  less  inflexible  observance  of  the 
principle  of  honesty  in  all  the  pecuniary  measures  of  the 
government.1 

His  correspondence  exhibits  a  remarkable  mastery  of 
every  question  that  engaged  his  attention.  He  was  no 
empiric :  he  digged  deeply,  and  based  his  policy  on  sound 
principles.  A  practical  financier,  he  was  also  familiar 
with  the  true  theories  of  finance ;  and  his  decisions  were 
never  accidental,  but  always  the  fruit  of  investigation 
and  reflection.    Of  course  he  was  the  executor  of  the 

1  Morris  formed  and  inflexibly  maintained  a  rule  in  respect  to  not 
diverting  public  funds  from  the  use  to  which  they  were  originally  and 
legally  appropriated ;  the  observance  of  which  by  some  of  his  predeces- 
sors would  have  added  much  to  their  reputation  for  honesty,  and  regard 
for  the  public  interests.  In  a  letter  to  Nathan  Appleton  he  says,  "  I 
will  most  inflexibly  adhere  to  my  determination,  for  I  will  not  partici- 
pate in  the  guilt  of  deceiving  those  who  trust  their  property  to  the 
public.  And  surely  it  is  a  deception  to  accumulate  promise  upon  prom- 
ise, and  debt  upon  debt,  without  the  means  of  performance  or  payment. 
The  States  alone  can  give  those  means,  and  if  they  will  give  them  I  will 
cheerfully  and  honestly  apply  them  to  the  purpose  for  which  they  shall 
be  given.  So  I  will  the  moneys  which  are  given  for  other  purposes.  But 
I  will  neither  pay  the  interest  of  our  debts  out  of  the  moneys  which  are 
called  for  to  carry  on  the  war,  nor  pay  the  expenses  of  the  war  from  the 
funds  which  are  called  for  to  pay  the  interest  of  our  debts."  —  Jan.  22, 
1782,  Hist.  Mag.,  vol.  vi.  p.  169. 


332        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1784. 

will  of  Congress ;  yet,  from  the  beginning  of  his  financial 
career,  he  constantly  kept  a  few  great  principles  in  sight, 
whose  source  was  the  unfailing  spring  of  moral  rectitude. 
In  one  of  his  letters  to  the  governors  of  the  Southern 
States,  he  says,  "  I  have  no  system  of  finance,  except  that 
which  results  from  the  plain,  self-evident  dictates  of  moral 
honesty." 1  Taxation  and  economy  were  the  two  pillars 
supporting  his  financial  structure,  and  they  were  as  solid 
as  the  foundation  on  which  they  rested.  Morris  was  in 
truth  the  peerless  financier  of  the  Revolution.2 

1  Dec.  19,  1781,  Dip.  Cor.,  vol.  xii.  p.  71. 

2  Samuel  Breck,  writing,  after  the  Eevolution  had  closed,  of  the  men 
who  figured  in  that  great  event,  says,  "  Among  the  very  leading  men  in 
all  respects  at  that  time  was  Robert  Morris.  History  has  not  yet  done 
justice  to  this  great  man's  noble  exertions  during  our  revolutionary 
war.  His  patriotism  was  superior  to  the  fears  which  too  often  seize 
upon  the  wealthy  in  moments  of  evil  commotion,  and  he  freely  risked 
every  thing  in  the  good  cause."  — Recollections  of  Samuel  Breck,  p.  203. 


RATION  OF  NEW  BOARD  OF  TREASURY.  333 


CHAPTER  II. 
ADMINISTRATION  OF  THE  NEW  BOARD  OF  TREASURY. 

Congress  having  been  duly  apprised  by  Morris  of  his 
intended  retirement  from  office,  it  became  necessary  to 
elect  a  successor,  or  provide  a  new  mode  of  administer- 
ing the  finances.  As  no  other  financier  was  known  to 
whom  Congress  was  willing  to  confide  the  powers  of 
Morris,  they  were  jointly  confided  to  three  persons,  who 
were  designated  "  The  Board  of  Treasury."  This  action 
was  taken  in  May,1  1784;  but,  as  the  first  appointees2 
would  not  serve,3  nearly  eight  months  passed  away  before 
John  Lewis  Gervais,  Samuel  Osgood,  and  Walter  Liv- 
ingston, were  appointed.4  Several  weeks  more  elapsed 
previous  to  their  embarking  on  the  much-dreaded  sea  of 
finance.  In  the  mean  time  the  comptroller  performed 
the  duties  of  financier.  His  qualifications  for  the  position 
had  been  improved  by  long  experience  in  adjusting  public 
accounts  prior  to  Morris's  resignation.  Congress  would 
have  shown  more  wisdom  had  the  comptroller  been 
chosen  Morris's  successor,  even  with  diminished  power, 
than  was  shown  in  restoring  the  former  thoroughly  tried 
and  inefficient  system  of  a  treasury  board. 

The  period  covered  by  this  chapter  is  extremely  barren 

i  May  27,  28.         2  June  3,  1784.         »  Nov.  30,  Dec.  10,  1784. 
*  Jan.  25,  1785.      «  March  23,  1784. 


332 


FINANCIAL  HISTORY  OF  THE  UNITED  Sr 


ifflS 

will  of  Congress ;  yet,  from  the  beginning 
career,  he  constantly  kept  a  few  great  princi| 
whose  source  was  the  unfailing  spring  of  moraij 
In  one  of  his  letters  to  the  governors  of  the 
States,  he  says,  "  I  have  no  system  of  finance,  excepr? 
which  results  from  the  plain,  self-evident  dictates  of  moral 
honesty." 1  Taxation  and  economy  were  the  two  pillars 
supporting  his  financial  structure,  and  they  were  as  solid 
as  the  foundation  on  which  they  rested.  Morris  was  in 
truth  the  peerless  financier  of  the  Revolution.2 


1  Dec.  19,  1781,  Dip.  Cor.,  vol.  xii.  p.  71. 

2  Samuel  Breck,  writing,  after  the  Revolution  had  closed,  of  the  men 
who  figured  in  that  great  event,  says,  "  Among  the  very  leading  men  in 
all  respects  at  that  time  was  Robert  Morris.  History  has  not  yet  done 
justice  to  this  great  man's  noble  exertions  during  our  revolutionary 
war.  His  patriotism  was  superior  to  the  fears  which  too  often  seize 
upon  the  wealthy  in  moments  of  evil  commotion,  and  he  freely  risked 
every  thing  in  the  good  cause."  — Recollections  of  Samuel  Breck,  p.  203. 


1784.]  ADMINISTRATION  OF  NEW  BOARD  OF  TREASURY.  333 


CHAPTER  II. 

ADMINISTRATION  OF  THE  NEW  BOARD  OF  TREASURY. 

Congress  having  been  duly  apprised  by  Morris  of  his 
intended  retirement  from  office,  it  became  necessary  to 
elect  a  successor,  or  provide  a  new  mode  of  administer- 
ing the  finances.  As  no  other  financier  was  known  to 
whom  Congress  was  willing  to  confide  the  powers  of 
Morris,  they  were  jointly  confided  to  three  persons,  who 
were  designated  "  The  Board  of  Treasury."  This  action 
was  taken  in  May,1  1784;  but,  as  the  first  appointees2 
would  not  serve,3  nearly  eight  months  passed  away  before 
John  Lewis  Gervais,  Samuel  Osgood,  and  Walter  Liv- 
ingston, were  appointed.4  Several  weeks  more  elapsed 
previous  to  their  embarking  on  the  much-dreaded  sea  of 
finance.  In  the  mean  time  the  comptroller  performed 
the  duties  of  financier.  His  qualifications  for  the  position 
had  been  improved  by  long  experience  in  adjusting  public 
accounts  prior  to  Morris's  resignation.  Congress  would 
have  shown  more  wisdom  had  the  comptroller  been 
chosen  Morris's  successor,  even  with  diminished  power, 
than  was  shown  in  restoring  the  former  thoroughly  tried 
and  inefficient  system  of  a  treasury  board. 

The  period  covered  by  this  chapter  is  extremely  barren 

1  May  27,  28.         2  June  3,  1784.         8  Nov.  30,  Dec.  10,  1784. 
4  Jan.  25,  1785.      5  March  23,  1784. 


334       FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1784. 

in  financial  measures  of  any  kind.  The  more  important 
events  relate  to  the  adjustment  of  accounts,  which  were 
exceedingly  numerous  and  complicated ;  all  the  States 
having  numerous  badly  tangled  transactions  with  the 
government,  while  an  army  of  individuals,  officials,  and 
private  persons,  were  debtors  or  creditors  to  the  United 
States.  By  the  constitution  of  Solon  all  officials,  at  the 
close  of  their  public  career,  were  required  to  render  their 
account,  and  apply  for  a  certificate,  undergoing  at  the 
same  time  the  closest  scrutiny.  This  excellent  political 
regulation  was  unknown  in  the  early  history  of  the 
American  Union;  and  consequently,  beside  the  enormous 
mass  of  accounts  awaiting  settlement,  many  of  them 
were  full  of  irregularities. 

Commissioners  had  been  appointed  in  February,1  1782, 
for  adjusting  accounts  with  the  States;  and  three  years 
later  the  number  was  increased.2  A  special  measure  was 
enacted3  for  ascertaining  the  specific  supplies  furnished 
by  Pennsylvania ;  and  the  time  for  presenting  claims  to 
the  commissioners  was  limited  to  one  year  from  the  date 
of  the  enactment,  March  17,  1785.  Just  as  this  period 
was  closing,  an  unsuccessful  attempt  was  made  to  extend 
the  time.  In  October,4  1786,  however,  a  new  ordinance 
was  passed  on  the  subject :  the  duties  of  the  commission- 
ers were  to  cease  on  the  1st  of  April  the  following  year ; 5 
and  a  board,  consisting  of  three  members,  was  created, 
possessing  all  the  powers  exercised  by  the  previous  com- 
missioners.   Additional  regulations  were  framed  concern- 

i  Feb.  20.      2  Feb.  23,  1785.      8  Sept.  5,  1786.      4  Oct.  13. 
6  Except  in  tbe  States  of  North  Carolina  and  Georgia,  where  they 
were  to  continue  in  office  six  months  longer. 


1787.1  ADMINISTRATION  OF  NEW  BOARD  OF  TREASURY.  335 

ing  the  testimony  requisite  to  establish  claims ;  the  time 
for  presenting  them  was  extended ;  and  a  period  of  three 
years  was  allotted  to  the  board  for  doing  the  work.  With- 
in seven  months,  the  ordinance  was  repealed.1  The  States 
were  divided  into  five  districts ;  in  each  of  which  a  com- 
missioner, appointed  by  the  Board  of  Treasury,  was  to  go, 
and  receive  from  the  States  embraced  therein  "all  their 
accounts  and  vouchers  for  payments  made  on  account  of 
bounties,  pay  and  depreciation  of  pay"  to  the  army  and 
militia,  and  send  the  same  to  the  commissioner  of  army 
accounts,  who  was  required  to  examine  and  pass  such  as 
were  authorized  by  the  resolves  of  Congress,  and  "  to 
state  such"  as  did  not  fall  under  the  above  description, 
"  together  with  such  remarks "  as  tended  to  elucidate 
their  nature.  The  commissioners  were  also  to  receive  in 
like  manner  the  accounts  and  vouchers  for  moneys  paid, 
and  supplies  furnished,  on  the  requisitions  of  Congress 
made  previously  to  October,  1781 ;  and  these  were  to  be 
forwarded  to  the  comptroller  of  the  treasury.  There  was 
a  third  class  of  claims  held  by  the  States  against  the 
government,  which  it  was  the  duty  of  the  commissioners 
to  receive  and  examine.  These  related  chiefly  to  ad- 
vances or  disbursements  for  the  use  of  the  commissary, 
quartermaster,  clothing,  marine,  and  hospital  departments. 
The  commissioners  were  to  pass  on  all  that  were  author- 
ized by  the  resolves  of  Congress  "and  supported  by 
proper  vouchers,"  and  "  to  state  such  "  as  were  not  "  thus 
warranted  or  supported,"  accompanying  them  with  re- 
marks explanatory  of  their  nature,  "and  the  reasons 
offered  for  the  deficiency  of  vouchers."    Six  per  cent 

i  May  7,  1787. 


336        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1787. 


interest  per  annum  was  allowed  on  all  accounts ;  and  the 
States  were  given  six  months  for  presenting  them  to  the 
commissioners,  who  were  required  within  a  year  to  repair 
to  the  place  where  Congress  was  in  session,  and  deliver 
the  accounts  and  vouchers  received  by  them  to  the  comp- 
troller of  the  treasury,  whereupon  their  commission  was 
to  terminate. 

At  the  same  time  Congress  appointed  three  commis- 
sioners to  receive  from  the  comptroller  of  the  treasury 
and  from  the  commissioner  of  army  accounts  every  ac- 
count of  the  States  in  the  possession  of  those  officers, 
and  to  examine  such  as  the  district  commissioners  had 
passed,  "  in  order  that  the  same  might  be  finally  adjusted 
on  uniform  and  equitable  principles."  Additional  in- 
structions were  given  them  to  light  their  intricate  path- 
way ;  yet  with  a  large  number  of  accounts  Congress  could 
do  no  more  than  vest  the  commissioners  "  with  full  power 
and  authority  to  make  such  allowance  for  the  same  as 
they  shall  think  consistent  with  the  general  principles  of 
equity."  A  very  dangerous  power,  surely,  to  confide  to 
commissioners,  —  an  authority  which  no  Congress  of  the 
present  day  would  dare  confer ;  yet  accounts  between 
the  States  and  the  government  were  so  confused,  that  it 
was  necessary  to  grant  a  very  wide  latitude  of  discretion 
to  some  body  in  order  to  effect  a  settlement. 

Notwithstanding  the  several  extensions  of  time  already 
granted  for  presenting  claims,  in  July,1  1787,  Congress 
carved  out  another  period  of  eight  months  for  presenting 
accounts  of  the  commissary,  quartermaster,  hospital, 
clothing,  and  marine  departments,  and  one  year  to  per- 

i  July  23. 


1788.]  ADMINISTRATION  OF  NEW  BOARD  OF  TREASURY.  337 

sons  having  claims  against  any  other  department  of  the 
government.  When  this  time  expired,  no  renewal  was 
granted  under  the  old  Confederation,  although  the  expe- 
diency of  granting  one  was  considered.1 

The  government,  while  trying  to  adjust  accounts  with 
the  States,  did  not  forget  the  claims  of  individuals, 
especially  of  those  who  had  served  in  the  recent  war. 
In  1782,2  for  the  purpose  of  liquidating  the  numerous 
claims  held  by  individuals,  the  country  was  divided  into 
five  departments,  —  quartermasters,  commissary,  hospital, 
clothing,  and  marine ;  and  for  each  a  commissioner  was 
appointed,  with  authority  to  adjust  the  claims  of  persons 
residing  within  his  jurisdiction.  Four  years  later  a  single 
commissioner  was  appointed  3  to  perform  the  same  duties ; 
but  after  serving  diligently  for  two  years,  and  with  im- 
perfect success,  an  additional  commissioner  was  assigned 4 
to  the  same  unpromising  task. 

Many  of  the  loan-office  commissioners  and  other  officials 
had  been  extremely  negligent  in  keeping  their  accounts, 
and  not  a  few  had  proved  recreant  to  their  trusts.  Their 
duties  at  first  were  not  very  strictly  defined :  consequently 
it  was  quite  easy  for  them  to  do  many  things  condemned 
alike  by  honesty  and  public  policy.  It  was  not  until 
September,5  1785,  that  Congress  prescribed  with  any 
accuracy  the  duties  of  this  class  of  officials.  They  were 
required  to  receive  and  keep  the  money  arising  from  Con- 
tinental taxes  in  the  different  States,  to  pay  the  interest 
due  from  the  General  Government,  and  to  "hold  all 
moneys  collected  within  the  several  States,  on  account  of 

1  Aug.  28,  1788.  2  Feb#  27.  »  March  24,  1786.  *  May  8,  1788. 
6  Sept.  30. 


338 


FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1788. 


the  requisitions  of  Congress,"  subject  only  to  the  orders 
of  that  body,  or  the  Board  of  Treasury.  They  were  also 
required  to  form  estimates  of  the  "interest  falling  due 
monthly  within  their  respective  States,"  to  keep  an  accu- 
rate account  of  their  transactions,  and  make  a  return 
thereof  to  the  Board  of  Treasury  and  comptroller,  and 
should  not  "  directly  or  indirectly  be  concerned  in  trade," 
and  in  all  their  official  transactions  were  to  govern  them- 
selves by  the  acts  and  resolves  of  Congress  or  the  orders 
of  the  Board  of  Treasury. 

So  loose  was  the  financial  system  of  the  government, 
that  negligence  and  fraud  rankly  grew  out  of  it.  Numer- 
ous as  were  the  frauds  exposed,  probably  many  fraudulent 
transactions  entirely  escaped  the  attention  of  Congress. 
A  committee  who  investigated  the  unsettled  accounts  of 
the  government  in  May,1  1788,  reported  that  "many 
millions  of  dollars  were  advanced  by  the  United  States 
to  sundry  persons "  during  the  late  war,  concerning  the 
expenditure  of  which  "proper  accounts  have  not  been 
rendered,"  though  they  had  been  frequently  requested  to 
render  them.  The  committee  believed  the  United  States 
had  suffered  "  very  great  inconveniencies  by  inexcusable 
negligence  and  unauthorized  delays  in  persons  intrusted 
with  public  moneys,  in  .not  rendering  and  settling  their 
accounts,"  and  recommended  the  Board  of  Treasury  to 
begin  suits  against  all  who  were  "  charged  with  public 
moneys  or  other  property,"  within  a  short  period  from 
the  date  of  making  their  report,  allowing  them  a  sufficient 
number  of  days  of  grace  to  settle  their  accounts,  if  they 
were  so  inclined.    This  recommendation  was  subsequently 


i  May  22. 


1788.]  ADMINISTRATION  OF  NEW  BOARD  OF  TREASURY.  339 

negatived  by  a  committee  of  the  third  Congress  held 
under  the  present  Constitution,  "  except  in  cases  where  a 
balance  appeared  to  be  clearly  due  to  the  public,  or  where 
special  circumstances  seemed  to  render  this  course  expe- 
dient." 1 

Progress  in  settling  the  accounts  of  both  States  and 
individuals  was  exceedingly  slow.  Loan-officers  who  held 
commissions  in  1788,  except  those  of  South  Carolina 
and  Georgia,  accounted  to  the  end  of  March,  1788 ;  but 
the  accounts  of  loan-officers  appointed  during  the  admin- 
istration of  the  finances  by  the  former  Treasury  Board, 
with  only  two  or  three  exceptions,  remained  unsettled 
during  the  old  Confederation.  "  With  respect  to  the  com- 
missioners appointed  for  settling  accounts  in  the  several 
States,"  say  a  committee  who  reported  to  Congress  on  the 
subject,2  "no  return  of  books  and  papers  has  been  made 
by  them,  except  the  States  of  New  York,  New  Jersey, 
Maryland,  Georgia,  and  Pennsylvania.  The  certificates 
liquidated  and  taken  up,  included  in  those  returns,  were 
lodged  in  the  comptroller's  office,  but  they  were  not  can- 
celled or  otherwise  defaced;  in  this  situation  they  lay 
neglected,  until  a  number  of  those  taken  up  in  the  State 
of  New  York,  which  were  negotiable,  were  feloniously 
taken  away  by  one  of  the  clerks  in  the  register's  office," 
where  the  papers  were  put  after  closing  the  comptroller's 
office.  Happily  most  of  the  certificates  were  recovered; 
but  the  incidents  surrounding  the  theft  show  how  care- 
lessly the  financial  business  of  the  day  was  conducted. 
Not  only  did  great  negligence  prevail  in  presenting  ac- 

1  Am.  State  Papers  by  Lowrie  and  Clarke,  Finance,  vol.  i.  p.  347. 

2  Sept.  30,  1788. 


340       FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1785. 

counts  to  the  commissioners,  but  also  in  making  their 
returns  to  the  government,  and  in  keeping  them  after- 
wards. Not  until  the  new  government,  under  the  inspir- 
ing genius  of  Hamilton,  sought  to  collect  and  adjust  the 
obligations  of  the  old  Confederation,  were  its  financial 
transactions  finally  reduced  to  order. 

In  respect  to  the  settlement  of  foreign  accounts, 
Thomas  Barclay  was  sent  on  a  special  mission  to  Europe 
in  1782,  for  the  purpose  of  adjusting  them.1  Jefferson 
described  him  as  honest,  but  slow  and  indecisive.2  Pur- 
suing his  difficult  way  for  several  years  with  fidelity  and 
considerable  success,  misfortunes  at  home  compelled  him 
to  return  before  he  had  completely  fulfilled  his  mission. 

The  loan-offices  were  still  employed  as  a  part  of  the 
financial  machinery  of  the  government ;  but  on  the  1st  of 
July,  1785,  all  other  receivers  of  money  from  the  States 
were  discontinued.3  The  certificates  which  they  had 
issued,  like  most  of  the  obligations  of  the  government, 
remained  unpaid,  and  also  the  interest  due  on  them: 
finally  Congress  resolved  4  that  the  holders  might  present 
them  to  the  loan-officers  of  the  State  where  they  were 
issued,  for  the  purpose  of  having  their  specie  value  ascer- 
tained, and  to  receive  a  new  one  for  this  amount  in  place 
of  the  original,  which  was  to  be  surrendered.5  Congress 
also  issued  new  ones 6  in  several  cases  where  the  originals 
had  been  destroyed. 

Congress  could  not  escape  seeing  the  evils  which  flowed 
from  the  absence  of  a  system  of  money:  so  it  was  re- 

i  Ante,  p.  312.         2  Works,  vol.  ii.  p.  155;  Ibid.,  pp.  183,  211. 
»  April  15,  1785.         4  Feb.  1,  1786.        6  Oct.  11,  1787. 
e  Aug.  19,  1785;  Sept.  12, 1781. 


17S6.]  ADMINISTRATION  OF  NEW  BOARD  OF  TREASURY.  341 


solved 1  to  establish  one  dollar  as  the  money  unit  of  the 
United  States ;  the  smallest  coin  consisting  of  copper,  two 
hundred  of  which  were  to  be  equal  to  one  dollar.  The 
value  of  the  several  pieces  was  to  increase  in  a  decimal 
ratio.  It  was  afterward  declared 2  "  that  the  standard  of 
the  United  States  of  America,  for  gold  and  silver,  shall 
be  eleven  parts  fine  and  one  part  alloy. 

"  That  the  money  unit  of  the  United  States,  being  by 
the  resolve  of  Congress  on  the  6th  July,  1785,  a  dollar, 
shall  contain  of  fine  silver  375^0  grains.3 

"That  the  money  of  account,  to  correspond  with  the 
division  of  coins,  agreeably  to  the  above  resolve,  proceed 
in  a  decimal  ratio,  agreeably  to  the  forms  and  manner 
following,  viz. ; 

"  Mills  :  The  lowest  money  of  account,  of  which  1,000 

shall  be  equal  to  the  Federal  dollar,  or  money  unit  0.001 

Cents  :  The  highest  copper  piece  of  which  100  shall  be 

equal  to  the  dollar  0.010 

Dimes :  The  lowest  silver  coin,  10  of  which  shall  be 

equal  to  the  dollar       .       .       .       .       .  .0.100 

Dollar:  The  highest  silver  coin   .....  1.000 

"  That  betwixt  the  dollar  and  the  lowest  copper  coin, 
as  fixed  by  the  resolve  of  Congress  of  the  6th  Juty,  1785, 
there  shall  be  three  silver  coins  and  one  copper  coin. 

44  That  the  silver  coins  shall  be  as  follows :  One  coin 
containing  181-$-fo  grains  of  fine  silver  to  be  called  A 
Half-Dollar ;  One  coin  containing  75tl2q8q  grains  of  fine 

1  July  6,  1785.         2  Aug.  8,  1786. 

8  The  money  unit,  therefore,  established  at  that  time  was  the  silver 
dollar.  See  Hamilton's  Report  on  the  Establishment  of  the  Mint, 
January,  1791. 


342        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1786. 


silver,  to  be  called  A  Double  Dime;  and  one  coin  con- 
taining 37j^°q  grains  of  fine  silver  to  be  called  A 
Dime. 

"  That  the  two  copper  coins  shall  be  as  follows :  One 
equal  to  the  100th  part  of  the  Federal  dollar,  to  be  called 
A  Cent ;  and  one  equal  to  the  200th  part  of  the  Federal 
dollar  to  be  called  A  Half-Cent. 

"  That  two  pounds  and  a  quarter  avoirdupois  weight  of 
copper,  shall  constitute  100  cents. 

"That  there  shall  be  two  gold  coins:  One  containing 
246t2q6q8q  grains  of  fine  gold,  equal  to  ten  dollars,  to  be 
stamped  with  the  impression  of  the  American  eagle,  and 
to  be  called  An  Eagle ;  One  containing  123-J^j-  grains 
-of  fine  gold,  equal  to  five  dollars,  to  be  stamped  in  like 
manner  and  to  be  called  A  Half-Eagle." 

Previous  to  the  adoption  of  this  measure,  the  Spanish 
«dollar  had  been  employed  as  the  standard  of  value ;  and 
obligations  had  been  incurred  with  the  expectation  of 
paying  and  receiving  it,  or  its  equivalent,  in  discharge 
of  them.  But  the  Spanish  dollar  exceeded  in  value  the 
American  by  more  than  two  per  cent ;  and  the  question 
soon  arose  whether  a  debt  could  be  honestly  as  well  as 
legally  discharged  by  paying  only  the  same  number  of 
dollars  of  the  new  kind  as  specified  in  the  contract.  It 
was  contended  that  the  difference  in  value  of  the  two 
kinds  ought  to  be  exactly  ascertained,  that  debts  already 
contracted  to  be  paid  in  dollars,  or  for  which  dollars  were 
a  legal  tender,  should  "  not  be  paid  in  American  dollars, 
without  an  .allowance  for  the  deficiency  of  their  value, 
compared  to  that  of  the  Spanish.    Otherwise,"  a  writer 


1786.]  ADMINISTRATION  OF  NEW  BOARD  OF  TREASURY.  343 


affirmed,  "  evident  injustice  must  follow." 1  Notwithstand- 
ing the  truth  of  his  conclusion,  Congress  took  no  note  of 
the  matter ;  and  debtors  were  at  liberty  to  pay  debts  con- 
tracted during  the  Spanish-dollar  reign  in  American  dol- 
lars, if  they  chose,  without  recognizing  any  difference 
between  the  two  kinds  in  value.  The  Coinage  Act, 
however,  was  never  put  in  operation;  and  this  is  the 
reason,  doubtless,  why  Congress  made  no  further  regu- 
lation on  the  subject.  Of  course,  so  long  as  no  Ameri- 
can dollar  existed  with  which  to  make  payments,  cred- 
itors could  not  complain  of  injustice  on  the  part  of  the 
government  growing  out  of  the  new  coinage  system. 

A  mint  was  subsequently  established ; 2  and  the  copper 
coin  of  the  government  was  declared  "  receivable  in  all " 
taxes  or  payments  due  to  the  United  States,  in  the  pro- 
portion of  five  dollars  for  every  hundred  dollars  so  paid. 
Foreign  copper  coins  were  declared  to  be  not  current 
after  the  first  day  of  September,  1787 :  at  the  same  time 
the  value  of  the  copper  coinage  of  the  States  was  estab- 
lished. 

During  the  year  1785  3  the  merchants  of  New  York 
sent  a  petition  to  Congress,  setting  forth  the  losses  which 

1  American  Museum,  August,  1787,  vol.  ii.  p.  184.  The  same  writer 
was  opposed  to  a  double  standard.  He  observed,  that,  while  silver  was 
made  the  standard,  "gold  might  still  be  coined,  to  ascertain  its  quantity 
and  fineness;  but  should  not,  like  money,  have  a  value  annexed  to  it  by 
public  authority,  but  be  left,  like  any  other  commodity,  to  find  it  at 
market." 

2  Oct.  16,  1786.  Three  or  four  dies  were  made  for  striking  copper 
coins,  a  number  of  pieces  were  struck;  but  no  regular  issue  of  coin  took 
place.  —  Linderman,  Money  and  Legal  Tender,  p.  21. 

3  3Iarch  28. 


344        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1785. 

thej'  had  sustained  from  the  depreciation  of  paper  money, 
loan-office  certificates,  and  other  obligations  of  the  gov- 
ernment, and  desiring  that  some  compensation  might  be 
made  to  them.  The  reader  will  doubtless  admire  the 
adroit  answer  of  Congress.  Not  denying  the  justness  of 
the  petitioners  to  receive  compensation  from  some  source, 
they  were  referred  to  the  Legislature  of  New  York  as  the 
proper  body  to  repair  their  losses.  Surely  Congress  could 
not  have  assented  to  their  request  without  increasing  the 
public  burdens,  which  were  now  very  poorly  borne.  Had 
Congress  consented  to  make  reparation  for  these  losses, 
that  body  could  not  have  done  otherwise  than  make  a 
similar  adjustment  with  every  other  creditor  of  the  United 
States  having  a  claim  of  the  same  nature.  The  way  in 
which  Congress  solved  the  problem  was  certainly  free 
from  imputation  of  partiality  towards  any  creditor,  or 
class  of  creditors. 

The  government  continued  to  receive  paper  money 
long  after  individuals  had  declined  to  take  it;  but,  in 
1785,  the  government  itself  refused  to  accept  it,  even  in 
payment  of  postage-stamps.1  The  States,  too,  were  re- 
quired to  pay  specie  on  the  requisitions  of  Congress:2 
truly  the  day  of  paper  money  had  finally  come  to  an 
inglorious  end.  Discredited  by  its  authors,  the  virtue  of 
paper  money  went  out  of  it,  never  to  return. 

The  issues  of  the  Bank  of  North  America  continued  to 
circulate  at  their  full  value.  The  difficulties  which  en- 
vironed the  institution  in  its  earlier  clays  disappeared :  all 
fears  respecting  its  ability  to  redeem  its  promises  sub- 
sided, and  in  the  third  year  of  its  existence  its  cash 

i  Sept.  20,  17SG.         2  Sept.  18,  Oct.  21, 17SG;  May  3,  1787. 


1786.]  ADMINISTRATION  OF  NEW  BOARD  OF  TREASURY.  345 

account  arose  to  5,957,000  Mexican  dollars.  Notwith- 
standing the  attacks  made  on  the  bank  during  the  suc- 
ceeding year,  "such  was  its  great  internal  strength  and 
the  energy  of  its  very  nature,"  that  its  transactions 
amounted  nearly  to  thirty-seven  million  dollars :  indeed, 
its  success  now  endangered  its  life.  Others  wished  to 
share  the  fat  dividends ;  and,  when  the  directors  refused 
to  increase  the  capital  of  the  bank,  the  erection  of  a  rival 
institution  was  proposed.  This  was  in  1784.  The  direct- 
ors of  the  old  concern  were  stoutly  opposed  to  the 
scheme,  and  prophesied  direful  consequences,  if  two 
banks  attempted  to  transact  business  in  Philadelphia  in 
opposition  to  each  other.  Both  banks  would  be  ruined. 
"  Two  shops  to  go  to,"  was  the  phrase  of  the  day.  The 
excitement  ran  high.  The  Assembly  of  Pennsylvania  was 
"plagued  with  long  arguments  on  both  sides;  "  but  "all 
at  once  the  thing  was  hushed  up,  and  accommodated." 
The  directors  of  the  bank  consented  to  increase  the 
capital  from  four  hundred  thousand  dollars  to  two  mil- 
lions, and  allow  the  projectors  of  the  new  enterprise  to 
become  stockholders  in  the  other. 

No  sooner,  however,  was  this  contest  settled,  than  an- 
other and  still  fiercer  was  forced  on  the  bank.  A  numer- 
ous party  arose  in  Pennsylvania,  who  demanded  the  issue 
of  more  paper  money ;  but  "  unless  the  bank  would  give 
it  currency,  which  everybody  saw  plain  enough  the  di- 
rectors could  not  do,"  a  new  paper  issue  could  not  be 
created,  as  the  State  was  powerless  to  put  forth  one 
having  the  confidence  of  anybody.  The  bank,  therefore, 
was  regarded  as  the  opponent  of  the  paper-money  scheme, 
the  friends  of  which,  unfortunately,  were  powerful  enough 


346        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1786. 

to  procure,  by  way  of  revenge,  a  repeal  of  the  charter  in 
September,1  1785.  The  bank,  however,  possessed  another 
charter  from  the  United  States,  under  which  it  continued 
to  transact  business  and  thrive,  till  March,  1787,  when 
Pennsylvania  re-incorporated  the  concern.  The  new 
charter,  however,  was  unlike  the  former  one,  so  different, 
indeed,  that  the  bank  was  no  longer  regarded  as  a 
national  institution.2 

During  the  period  we  are  now  considering,  fresh  at- 
tempts were  made  to  raise  a  revenue  from  imports,  and 
the  States  were  urged  to  adopt  the  Recommendations  of 
Congress  passed  in  1783  relating  to  the  subject.  The 
States  slowly  adopted  the  system  then  proposed,3  but 
with  various  qualifications ;  Pennsylvania  insisting  on 
the  consent  of  all  the  States  before  the  measure  should 
be  operative  anywhere.  The  conditions  imposed  by  New 
York  were  still  worse ;  as  they  essentially  changed  the 
nature  of  the  measure,  and  effectually  killed  it.  Not 
until  the  adoption  of  the  present  Constitution  was  the 
government  able  to  lay  a  tax  on  imports. 

Failing  to  get  any  funds  from  this  source  to  maintain 
the  government,  it  was  obliged  to  depend  almost  wholly 
on  the  States  ;  as  the  sales  of  government  property,  includ- 
ing the  public  lands,  yielded  only  a  very  trifling  sum.4 
The  issuing  of  "  indents,"  or  certificates  for  interest  accru- 
ing on  loan-office  certificates  and  liquidated  debts,  was 

1  Sept.  13. 

2  See  Hamilton's  report  on  establishing  a  national  bank,  Works,  vol. 
iii.  p.  126;  also  Webster's  Essay  on  Credit,  giving  a  history  of  the  bank, 
Political  Essays,  p.  427;  Rep.  of  Com.  of  Leg.  of  Pemi.,  March  28,  1785. 

8  Feb.  15,  July  27,  Aug.  11,  22,  1780. 
1  See  Act,  May  28,  1784. 


1786.]  ADMINISTRATION  OF  NEW  BOARD  OF  TREASURY.  347 

authorized;1  but  these  neither  paid  debts,  nor  satisfied 
creditors.  Requisitions  on  the  States  were  poorly  heeded. 
All  authority  over  them  seemed  to  be  dying  out,  while 
their  interest  in  the  government  was  rapidly  waning. 

Yet  the  sale  of  the  public  lands,  even  at  that  early  day, 
was  confidently  regarded  by  many  as  a  source  whence 
considerable  sums  could  be  obtained  for  the  government. 
The  States,  after  a  long  dispute,  ceded  their  interest  in  the 
Western  lands,  thus  essentially  fixing  their  own  bounda- 
ries, and  determining  what  portion  remained  for  public 
disposal.  It  was  in  1787  that  the  celebrated  ordinance 
was  passed  regulating  the  government  of  the  territory 
north-west  of  the  Ohio ;  and  every  needed  requisite  was 
soon  adopted  to  make  the  title  of  lands  secure  to  those 
who  were  desirous  of  purchasing  any  part  of  the  public 
domain.  As  certificates  of  the  public  debt  could  be  re- 
ceived in  pa}rment,  Jefferson  was  so  confident  in  1785,  as 
to  express  the  opinion  that  this  arrangement  would  very 
soon  absorb  all  the  certificates  given  by  the  government 
for  debts,  "  and  thus  rid  us  of  our  domestic  debt," 2  which 
at  that  time  comprised  four-fifths  of  the  total  indebted- 
ness of  the  government. 

The  estimates  for  the  year  1785  were  not  fixed  until 
the  close  of  September 3  of  that  year,  and  the  resolutions 
accompanying  them  reveal  the  poverty  and  weakness  of 
the  government.  Only  8404,553  were  required  for  the 
civil  and  military  departments  and  contingencies ;  the  in- 

1  Aug.  23,  Oct.  30,  1786. 

2  Works,  Letter  to  David  Hartley,  Sept.  5,  1785,  vol.  i.  p.  424:  see 
Ibid.,  vol.  ii.  pp.  325,  333,  358. 

8  Sept.  27. 


848        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1T86. 


terest  on  the  foreign  debt  was  $440,252;  and  $743,054 
were  required  to  pay  the  interest  on  the  domestic  debt.1 
Beside  these  expenditures,  the  interest  on  soldiers'  certifi- 
cates was  estimated  at  $289,423 ;  and  the  expenses  of  the 
previous  year  had  exceeded  the  estimate  by  $1,141,551. 
Congress  asked  for  three  million  dollars ;  and,  as  more 
than  two-thirds  of  this  sum  was  to  be  applied  in  pay- 
ment of  interest  on  the  domestic  debt,  it  was  believed  that 
the  Legislatures  of  the  States  could  "so  model  the  col- 
lection of  the  sums  called  for,  that,  one-third  of  any  sum 
being  paid  in  actual  money,  the  other  two-thirds  might 
be  discharged  by  the  interest  due  upon  loan-office  certifi- 
cates, and  upon  other  certificates  of  liquidated  debts  of 
the  United  States."  As  the  States  had  not  fully  paid  the 
eight-million  requisition  of  1781,  and  no  portion  of  the 
two-million  one  of  1782,  it  was  decided  to  apply  the  sums 
received  on  these  two  requisitions.  In  October  the  States 
were  urgently  asked  to  fulfil  the  recommendations  of  Con- 
gress ;  but  the  months  rolled  away,  the  stones  of  the  tax- 
mill  turned  slowly,  and  only  very  small  sums  fell  into 
the  treasury.  Four  requisitions  had  been  ordered  since 
Oct.  30,  1781,  for  $15,670,987 ;  yet  towards  this  sum  all 
the  States  had  contributed,  by  the  1st  of  February,  1786, 
in  the  aggregate,  only  $2,450, 803.2  Were  States  ever 
so  able  to  bear  taxation  more  disinclined  to  do  their 

1  Madison  writes  to  Monroe,  May  29,  1785,  "  The  use  of  certificates 
as  a  medium  for  discharging  the  interest  of  the  home  debt  is  a  great 
evil,  though  I  suppose  a  necessary  one.  The  advantage  it  gives  to 
sharpers  and  collectors  can  scarcely  be  described,  and  what  is  more 
noxious,  it  provokes  violations  of  public  faith  more  than  the  weight  of 
the  burden  itself."  —  Writing^  vol.  i.  p.  153. 

-  Report  of  Com.  to  Cong.,  Feb.  3,  1780. 


1786.]  ADMINISTRATION  OF  NEW  BOARD  OF  TREASURY.  349 

duty  in  this  regard  ?  Everywhere  did  individuals  seek  to 
evade  the  payment  of  taxes ;  not  because  they  were  too 
poor  to  pay,  for  the  sums  asked  were  small  compared  with 
the  resources  of  the  people,  but  rather  from  habit,  and 
because  evasion  of  the  duty  was  so  general. 

It  was  during  this  period  that  a  new  mania  broke  out 
for  paper  money.  Pennsylvania  and  North  Carolina  led 
in  the  movement.  In  the  former  State  the  sum  emitted 
was  not  large,  nor  was  it  made  a  legal  tender ;  but  ere 
long  its  value  was  totally  gone.  North  Carolina  issued 
a  larger  sum,  which  was  endowed  with  a  legal  tender 
quality.  It  was  issued  partly  in  payments  to  military 
creditors,  and  partly  for  purchases  of  tobacco  on  public 
account.  Madison,  in  describing  the  method  employed 
when  introducing  it  in  that  State,  says,  "  The  agent  was 
authorized  to  give  nearly  the  double  of  the  current  price ; 
and,  as  the  paper  was  a  tender,  debtors  ran  to  him  with 
their  tobacco,  and  the  creditors  paid  the  expense  of  the 
farce."  South  Carolina  followed  next:  her  emissions 
consisted  of  loans  to  individuals,  but  wTere  not  a  legal 
tender.  New  Jersey  issued  as  loans  more  than  a  hundred 
thousand  pounds  of  legal  tender  paper  money.  New  York 
followed  in  the  same  way,  though  the  money  was  de- 
clared to  be  a  legal  tender  in  suits  only.  In  Rhode 
Island  one  hundred  thousand  pounds  were  issued  to  in- 
dividuals in  the  way  of  loans,  which  were  not  only  made 
a  legal  tender,  but  severe  penalties  were  visited  upon 
the  head  of  any  person  who  directly  or  indirectly  should 
give  a  preference  to  specie.  Nearly  all  the  States  imi- 
tated the  example  of  Pennsylvania  and  North  Carolina. 
Prices  rapidly  rose,  or,  in  other  words,  the  money  depre- 


350        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1786. 

ciated,  and,  after  causing  a  great  variety  of  serious  mis- 
chiefs, disappeared,  like  too  many  former  issues,  leaving 
nothing  but  misery  and  dishonesty  to  mark  its  course.1 

August  of  1786 2  had  come  before  Congress  fixed  the 
estimates  for  the  year,  amounting  to  $3,777,062.  As  the 
policy  was  established  of  receiving  indents  from  the  States 
in  payment  of  their  quotas,  the  sum  asked  for  the  ensuing 
year  was  apportioned  in  the  following  manner :  — 


INDENTS. 

SPECIE. 

New  Hampshire  . 

.  $56,452 

$76,268 

Massachusetts 

.  240,370 

324,746 

Rhode  Island 

.  34,613 

446,764 

Connecticut  . 

.  141,474 

191,135 

New  York 

.  137,434 

185,567 

New  Jersey  . 

.  89,279 

120,619 

Pennsylvania 

.  219,765 

296,908 

Delaware 

.  24,037 

32,475 

Maryland 

.  151,570 

204,775 

Virginia 

.  274,707 

371,136 

North  Carolina 

.  116,349 

157,732 

South  Carolina 

.  103,015 

139,017 

Georgia 

.  17,167 

23,388 

$1,606,632  $2,170,430 

Total  $3,777,062. 


The  annual  interest  due  on  the  domestic  debt  amounted 
to  11,606,560,  which  sum  Congress  proposed  to  raise  by 
allowing  the  people  to  pay  indents  therefor  in  lieu  of 
money.  This  policy  of  allowing  the  payment  of  indents, 
to  a  limited  extent,  in  lieu  of  money  for  taxes,  was  con- 
tinued as  long  as  the  government  existed  under  the 
Articles  of  Confederation. 

1  Writings  of  Madison,  vol.  i.  p.  244. 

2  Aug.  2;  see  also  Act,  Oct.  17,  1786. 


1788.]  ADMINISTRATION  OF  NEW  BOARD  OF  TREASURY.  351 

Notwithstanding  the  failure  of  the  government  to  pay 
its  domestic  obligations,  and  also  the  interest  that  was 
due  to  France,  the  wages  of  foreign  officers,  and  other 
claims  abroad,  the  credit  of  the  government  in  Holland 
especially  was  so  well  maintained,  that  Jefferson  writes 
to  Madison,  in  May,1  1788,  "The  Dutch  consider  us  as 
the  most  certain  nation  on  earth  for  the  principal ;  but 
they  see  that  we  borrow  of  themselves  to  pay  the  inter- 
est, so  that  this  is  only  a  conversion  of  their  interest 
into  principal.  Our  paper,  for  this  reason,  sells  for  from 
four  to  eight  per  cent  below  par  on  the  exchange,  and 
our  loans  are  negotiated  with  the  patriots  only.  But 
the  whole  body  of  money-dealers,  patriot  and  stadtholde- 
rian,  look  forward  to  our  new  government  with  a  great 
degree  of  partiality  and  interest.  They  are  disposed  to 
have  much  confidence  in  it,  and  it  was  the  prospect  of  its 
establishment,  which  enabled  us  to  set  the  loan  of  last 
year  into  motion  again."  The  contract  respecting  the 
payment  of  interest  on  the  loans  in  Holland  had  been 
honestly  fulfilled,  which  accounted  for  the  strength  of 
American  credit  there;  but  the  government  had  repeat- 
edly failed  to  keep  its  engagements  with  France.  The 
time  had  now  come,  however,  when  a  failure  to  fulfil  the 
obligations  made  with  this  latter  power  would  inevitably 
affect  the  credit  of  the  United  States.  The  previous 
non-payment  of  French  interest  had  caused  but  little 
injury,  because  nothing  had  been  said  about  the  matter: 
evidently  France  was  willing  to  give  America  a  little 
breathing-space  before  insisting  upon  payment.  "It  is 
now  seen,"  writes  Jefferson  from  Paris,  in  May,  1788,2 

1  Works,  vol.  ii.  p.  376.  2  Ibid.,  p.  377. 


352        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1788. 


"  that  they  call  for  it,  and  they  will  publish  annually  the 
effect  of  that  call.  A  failure  here,  therefore,  will  have 
the  same  effect  on  our  credit  hereafter,  as  a  failure  at 
Amsterdam."  France  had  treated  the  United  States 
with  the  utmost  consideration  and  leniency;  but  it  was 
impolitic,  at  least,  to  lean  on  her  forbearance  any  longer. 
Honesty  and  wisdom  alike  demanded  that  America  should 
arouse  herself,  and  fulfil  her  obligations. 

During  the  same  period  the  account  of  the  government 
with  its  banker  in  Paris,  M.  Grand,  was  overdrawn  to 
the  amount  of  thirty-two  thousand  livres.  About  fifteen 
thousand  livres  also  had  been  advanced  from  a  fund  be- 
longing to  Virginia,  that  had  been  placed  in  his  poses- 
sion  for  the  purchase  of  arms,  a  statue  to  Washington, 
and  other  things.1  Jefferson  had  previously  borrowed  on 
two  different  occasions  from  the  United  States  for  the 
benefit  of  Virginia,  —  first  ten  thousand  livres,  and  after- 
ward 2,724  livres  more :  he  now  put  his  hand  into  the  Vir- 
ginia pocket,  and  borrowed  a  larger  sum  for  the  use  of  the 
government  he  represented,  expecting  the  amount  would 
be  speedily  repaid,  but  which  was  not,  until  another  loan 
had  been  obtained.2  Though  he  acted  without  adequate 
authority,  his  conduct  occasioned  no  criticism. 

Nearly  half  of  October,3  1787,  was  gone  when  the  esti- 
mates for  that  year  were  presented,  which  were  essentially 
the  same  as  those  of  the  previous  year.  The  Board  of 
Treasury  had  been  successful  in  paying  interest  on  its 
obligations  to  Holland  by  making  remittances  from  Ameri- 
ca, and  by  applying  in  this  way  the  balance  of  the  last 
Holland  loan ;  but  the  government  very  narrowly  escaped 

1  Jefferson's  Works,  vol.  ii.  p.  223.      2  Ibid.,  p.  385.      8  Oct.  11. 


1787.]  ADMINISTRATION  OF  NEW  BOARD  OF  TREASURY.  353 


defaulting  the  interest  due  in  June,  1787.  The  impend- 
ing default  was  averted  by  Adams,  who  negotiated  a  new 
loan  for  one  million  guilders,  which  cost  the  United  States 
eight  per  cent,  including  premium,  commission  of  brokers, 
brokerage,  and  other  charges,  —  a  very  high  rate  truly; 
but  it  was  impossible  to  procure  money  on  more  favorable 
conditions.1  Among  other  consequences  following  this 
event,  Congress  the  next  year  did  not  ask  the  States  to 
contribute  towards  paying  interest  or  principal  on  the 
foreign  debt :  the  quotas  included  merely  the  estimated 
expense  of  running  the  machinery  of  government,  and 
interest  on  the  domestic  debt,  amounting  in  the  aggregate 
to  $1,686,541.2 

It  was  practicable,  so  thought  Adams  and  Jefferson,  to 
transfer  the  domestic  as  well  as  the  French  debt  of  the 
United  States  to  Holland;  but  it  is  difficult  to  discover 
what  advantages  would  have  accrued  to  the  United  States, 
had  the  transfer  been  made.  It  might,  indeed,  have  proved 
an  accommodation  to  France,  as  she  was  at  this  time  in 
great  need  of  money;  but  the  Board  of  Treasury  had 
sound  reasons  for  believing  the  transfer  would  unfavora- 
bly affect  the  credit  of  their  own  country.  Hitherto  the 
credit  of  the  United  States  in  Holland  had  been  pre- 
served; but  the  prospect  of  doing  so  much  longer 
was  rapidly  growing  darker.  The  treasury  board  re- 
garded the  proposed  transfer  very  unjust,  as  well  as 
impolitic,  —  unjust,  because  the  United  States  would 
contract  an  engagement  without  any  well  grounded  ex- 
pectation of  discharging  it  with  punctuality ;  impolitic, 

1  J.  Adams's  Works,  vol.  viii.  p.  440. 

2  Estimates  for  1788,  see  Act  of  Aug.  20  of  that  year. 


354        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1787. 


because  a  failure  to  pay  interest  to  the  Dutch  creditors 
would  justly  blast  all  hopes  of  credit  with  the  citizens  of 
the  United  Netherlands  when  the  exigencies  of  the  Union 
might  render  new  loans  indispensably  necessary.1  Mean- 
while the  Holland  bankers  of  the  United  States  were  pur- 
chasing "  immense  quantities  of  American  paper,'' 2  and 
were  desirous  of  obtaining  an  agreement  from  the  govern- 
ment to  pay  it  in  Europe.  Adams  deemed  this  a  very 
impolitic  measure;  and  in  a  letter  to  Jefferson,  after  al- 
luding to  the  fact  that  the  Continental  certificates  and 
interest  thereon  were  payable  in  America,  he  says,  "  If  a 
precedent  is  set  of  paying  them  in  Europe  I  pretend  not 
to  sufficient  foresight  to  predict  the  consequences ;  they 
appear,  however,  to  me  to  be  horrid.  If  the  interest  of 
one  million  of  dollars  is  paid  this  year  in  Europe,  you 
will  find  the  interest  of  ten  millions  demanded  next 
year."  Happily,  these  consequences  were  averted  by 
sticking  fast  to  the  practice  of  paying  interest  on  all 
foreign  obligations  in  the  United  States,  except  in  those 
cases  where  another  place  had  been  specified  in  the 
original  agreement. 

1  Secret  Journal  of  Foreign  Affairs,  Oct.  2,  1787. 

2  Yet  Jefferson  had  written  to  N.  and  J.  Van  Staphorst,  July  30,  1785  r 
"Some  people  in  America  have  seriously  contended,  that  the  certificates^ 
and  other  evidences  of  our  domestic  debt,  ought  to  be  redeemed  only  at^ 
what  they  have  cost  the  holder;  for  I  must  observe  to  you,  that  these7 
certificates  of  domestic  debt,  having  as  yet  no  provision  for  the  payment 
of  principal  and  interest,  and  the  original  holders  being  mostly  needy, 
have  been  sold  at  a  very  great  discount.  When  I  left  America  (July, 
1784)  they  sold,  in  different  States,  at  from  fifteen  shillings  to  two  shil- 
lings and  sixpence  in  the  pound;  and  any  amount  of  them  might  then 
have  been  purchased."  — Jefferson's  Works,  vol,  i.  p.  3G9. 


1787.]  ADMINISTRATION  OF  NEW  BOARD  OF  TREASURY.  355 

A  very  cosiderable  portion  of  the  domestic  debt  had 
been  purchased  by  Dutch  bankers  at  a  heavy  discount ; 
and  one  of  them,  M.  Stanetski,  who  had  acted  as  a  broker 
for  the  United  States,  held  14,340,000  of  it.  He  offered 
to  complete  the  subscriptions  to  the  new  loan,  which  at 
that  time  was  making  no  progress,  provided  the  govern- 
ment would  pay  him  a  year's  interest  upon  that  portion 
of  the  government  debt  owned  by  himself.  The  amount 
remaining  to  be  subscribed  was  622,840  florins,  about 
two-thirds  of  the  whole ;  while  the  sum  he  wished  to 
retain  for  interest  due  to  himself  was  180,000  florins,  — 
a  deduction  of  ten  per  cent  from  the  entire  amount,  which 
he  was  willing  to  allow  for  receiving  payment  in  Europe.1 
This  offer  was  not  favorably  received ;  although  Messrs. 
Willink  and  Van  Staphorsts,  who  were  trying  to  nego- 
tiate the  loan  for  the  United  States,  favored  its  accept- 
ance.2 They,  too,  were  owners  of  a  portion  of  the 
domestic  debt,  and  consequently  were  to  gain  more  if 
the  plan  could  be  forced  upon  the  government.3  What- 
ever might  have  been  the  real  motives  for  seconding  this 
scheme,  when  they  found  it  would  not  be  entertained, 
they  quickly  succeeded  in  completing  the  loan,  as  well 
as  another  for  one  million  florins,  which  the  government, 
upon  the  suggestion  of  Jefferson  and  Adams,4  authorized 
for  the  purpose  of  obtaining  funds  sufficient  to  pay 
the  interest  for  the  year  following,  rather  than  depend 
upon  remittances  from  home.  This  was  the  last  loan  of 
the  kind  raised;  for  the  new  government  came  into  opera- 
tion, and  furnished  money  thereafter  to  pay  its  annually- 

1  Jefferson's  Works,  vol.  ii.  p.  351.  2  Ibid.,  pp.  352,  363. 

8  Ibid.,  p.  368.  *  Ibid.,  p.  473. 


356        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1787. 

recurring  obligations.  The  loans  thus  obtained  were  more 
than  sufficient  to  meet  the  interest  on  the  Holland  loans : 
so  the  balance  was  applied  in  paying  the  sum  borrowed 
from  Virginia  and  from  M.  Grand,1  and  in  discharging  the 
interest  due  to  foreign  officers,2  now  amounting  to  60,393 
livres  3  annually,  many  of  whom  were  loudly  clamoring; 
for  their  pay,4  and  unceasing  in  their  denunciations  of 
the  government  because  of  its  failure  to  pay  them. 

In  selling  the  public  lands,  so  Jefferson  said,  the  gov- 
ernment had  been  "immensely  successful."  The  state- 
ment is  made,  solely  on  his  authority,  that  five  million 
acres  were  sold  at  private  sale  for  a  dollar  an  acre,  in 
certificates ;  and  that  at  the  public  sales  as  high  a  price  as 
two  dollars  and  forty  cents  was  paid,  in  some  cases. 
"Bye these  means,"  he  adds,  "taxes,  and  our  domestic 
debt,  originally  twenty-eight  millions  of  dollars,  was  re- 
duced, by  the  first  day  of  last  October,  to  twelve  millions, 
and  they  were  then  in  treaty  for  two  millions  of  acres 
more,  at  a  dollar,  private  sale.  Our  domestic  debt  will 
thus  be  soon  paid  off ;  and,  that  done,  the  sales  will  go  on 
for  money  at  a  cheaper  rate,  no  doubt,  for  the  payment 
of  our  foreign  debt."  5  Jefferson,  with  his  sanguine  tem- 
perament, never  looked  at  any  thing  in  a  more  rosy-colored 
way  than  he  did  at  the  national  finances.  From  first  to  last 
he  never  failed  to  blunder  whenever  he  said  much  about 
them.  Some  sales  of  land  were,  indeed,  made,  but  not 
the  quantity  stated  by  him.  Upon  what  foundation  he 
based  such  a  reckless  statement,  it  is  impossible  to  con- 


i  Jefferson's  Works,  vol.  ii.  p.  394.      2  Ibid.,  vol.  iii.  pp.  28,  37. 
8  Ibid.,  ii.  p.  91.      4  Ibid.,  vol.  i.  p.  479. 

5  Letter  to  William  Carmichael,  Dec.  11,  1787,  Works,  vol.  ii.  p.  325. 


1788.]  ADMINISTRATION  OF  NEW  BOARD  OF  TREASURY.  357 


ceive.  How  marked  is  the  contrast  between  his  bold 
coloring  and  the  soberer  tints  of  Madison,  contained  in  a 
letter  to  Randolph  ! 1 —  "  Our  situation  is  becoming  every- 
day more  and  more  critical.  No  money  comes  into  the 
Federal  treasury ;  no  respect  is  paid  to  the  Federal 
authority ;  and  people  of  reflection  unanimously  agree 
that  the  existing  Confederacy  is  tottering  to  its  foun- 
dation." 

On  the  last  day  of  September,  1788,  a  committee  made 
a  report  concerning  the  receipts  and  expenditures  of  the 
treasury  from  November,  1784,  when  Morris  resigned,  to 
April  21, 1788,  —  a  period  of  three  years  and  five  months. 
The  report  contains  some  very  striking  figures ;  for  exam- 
ple, the  receivers  of  taxes  had  paid  into  the  treasury  only 
$143,648  from  the  time  of  Morris's  resignation  to  April 
21,  1785,  and  for  the  next  three  years  only  $996,448 
were  received  from  the  same  source.  The  rest  of  the 
funds  obtained  by  Congress  during  this  period  consisted 
chiefly  of  indents,  or  certificates  of  interest,  which  amount- 
ed to  $1,881,139,  besides  a  few  small  sums  realized  from 
the  sale  of  war  material  and  public  lands.  To  the  in- 
come thus  derived,  must  be  added  the  balance  of  the 
first  Holland  loan,  and  also  the  loan  of  1788.  The  com- 
mittee, moreover,  sought  to  ascertain  the  condition  of  the 
public  accounts ;  but  they  were  unable  to  glean  any  sat- 
isfactory information  in  regard  to  them.  To  the  secret 
committee  of  Congress  had  been  advanced  more  than  two 
million  dollars ;  "  and  a  considerable  part  of  this  money 
remains  to  be  accounted  for,  otherwise  than  by  contracts 

1  Feb.  25,  1787,  Madison  Papers,  vol.  ii.  p.  620 ;  same  facts  also 
stated  in  Letter  to  Jefferson,  Dec.  20,  1787,  Ibid.,  p.  658. 


358        FINANCIAL  HISTORY  OF  THE  UNITED  STATES.  [1T88. 


made  with  individuals  of  their  own  body,  while  those 
individuals  neglect  to  account."  Other  sums  had  been 
paid  by  the  Board  of  Treasury  without  authority  of  Con- 
gress :  in  respect  to  large  sums  received  from  France,  the 
manner  of  their  expenditure  seemed  uto  be  involved  in 
darkness."  The  remainder  of  the  report  is,  for  the  most 
part,  a  continuation  of  the  dismal  story.  Extraordinary 
negligence,  wastefulness,  disorder,  and  corruption  marked 
the  early  years  of  the  government ;  even  in  the  darkest 
periods  through  which  the  country  has  since  passed,  it 
may  be  questioned  whether  a  greater  lack  of  system  or 
moral  rectitude  has  prevailed.  Yet  Adams,  writing  to 
Jefferson,  declares  that  "all  the  perplexities,  confusions, 
and  distress  in  America,  arise,  not  from  defects  in  their 
Constitution  or  Confederation,  not  from  a  want  of  honor 
or  virtue,  so  much  as  from  downright  ignorance  of  the 
nature  of  coin,  credit,  and  circulation."1  Ignorance  in 
respect  to  those  things  was  indeed  very  apparent;  but 
much  graver  lacks  were  honesty,  diligence,  and  capacity 
among  officials  in  the  fulfilment  of  their  duties.  The 
greatest  need  was  a  strong,  well-cemented  government. 
Adams's  long  absence  from  the  country  had  prevented 
him  from  seeing  its  worst  defects,  and  he  discovered 
only  those  flaws  which  appeared  in  the  course  of  his 
business  with  the  government.  The  most  cursory  reader 
of  the  foregoing  pages  must  have  seen  the  extreme  weak- 
ness of  the  government  in  other  ways  than  a  want  of 
knowledge  among  its  members  concerning  the  nature  of 
coin,  credit,  and  circulation. 

1  Aug.  25,  1787,  J.  Adams's  Works,  vol.  viii.  p.  447. 


INDEX. 


INDEX. 


A. 

Accounts,  settlement  of,  between 
the  General  Government  and  the 
States,  93  ;  loan-office  commission- 
ers directed  to  settle  their  accounts, 
288;  Morris's  efforts  to  settle  ac- 
counts between  the  States  and 
the  General  Government,  290-292, 
319,  320  ;  act  relating  to  settlement 
of  accounts,  327;  condition  of  ac- 
counts in  1784,  334;  commissioners 
appointed  for  adjusting  accounts  of 
the  States,  334 ;  regulations  upon 
the  subject,  334-337;  settlement  of 
accounts  of  individuals,  337,  338 ; 
report  of  committee  on  the  subject, 
338,  339 ;  slow  progress  in  settling 
them,  339,  340 ;  settlement  of  for- 
eign accounts,  340 ;  account  with 
banker  in  Paris  overdrawn,  317, 
352.  Morris ;  Board  of  Treasury  ; 
Congress ;  Claims. 

Adams,  John,  his  opinion  respecting 
paper  money,  29,  30  ;  its  issue  a  ne- 
cessity, 36  ;  rate  of  interest  on  loan 
too  low,  47;  depreciation  of  paper 
money  in  Massachusetts,  126,  127 ; 
his  views  on  the  subject,  127,  128 ; 
depreciation  an  advantage,  199;  reg- 
ulation of  prices,  159  ;  taxation,  196  ; 
sent  to  Europe  after  Deane's  re- 
call, 250;  goes  to  Holland,  250; 
difficulty  in  getting  loans,  250;  bills 
drawn  on  him,  251;  opens  a  loan, 
251 ;  history  of  his  financial  nego- 
tiations, 251,  252  ;  promise  of  Ca- 
pellen,  252,  253;  transfer  of  French 


debt  to  Holland*,  353;  efforts  of 
Amsterdam  banking-house  to  raise 
money,  253,  254  ;  correspondence 
with  Franklin  on  the  subject,  254, 
255  ;  negotiations  with  Willink, 
256-258;  demand  of  European  na- 
tions for  money,  256, 257 ;  condition 
of  American  finances  in  Europe  at 
close  of  1784,  258 ;  ignorance  of  the 
people  on  financial  matters,  358,. 
359.   Foreign  Loans. 

Adams,  Samuel,  opposed  to  the  ap- 
pointment of  a  superintendent  of 
finance,  114. 

Army,  mutiny  in,  54 ;  wrong  mode 
of  enlistments,  80 ;  "Washington's 
opinion,  80;  critical  condition  of, 
99  ;  sufferings  of,  at  Valley  Forge, 
128;  refuse  to  receive  old  emissions 
of  paper  money,  142;  payment  of 
specie  to  soldiers,  316 ;  mode  of 
final  payment,  316. 

Arnold,  Gen.,  attempt  to  defraud  the 
government,  214,  215. 

Assessment  of  taxes.  Taxation  ;  Es- 
timates ;  Specie. 

B. 

Bank,  creation  of,  to  assist  the  gov- 
ernment, 100 ;  a  patriotic  move- 
ment, 101;  Congress  pledges  the 
faith  of  the  government  to  sub- 
scribers, 101;  amount  contributed, 
101;  establishment  and  success  of 
Bank  of  North  America,  273-275, 
344 ;  opposed  to  issuing  paper  mon- 
ey, 345,  346.  Morris. 

361 


362 


INDEX. 


Beaumarchais,  aid  from,  221,  223 ; 

contract  with,  224;  success  of  plan, 

224,  225;  dealings  with,  235,  240. 

Foreign  Loans. 
Bills   of   exchange,  327.  France; 

Loan ;  Foreign  Loans  ;  Congress ; 

Sullivan. 

Bonstellin,  description  of  condition 
of  the  country,  75. 

Board  of  Treasury,  duty  respecting 
examination  of  claims,  15;  powers 
more  minutely  denned,  15;  ineffi- 
ciency of  board,  16,  306,  307;  re- 
organized, 16;  duties  of  auditor, 
17;  of  comptroller,  18,  19;  of  treas- 
urer, 18;  progress  indicated  by  the 
act,  20;  salaries  of  officers,  20;  re- 
organized, 20;  abolition  of  comptrol- 
ler's office,  21;  appointment  of  five 
commissioners,  21;  power  of  com- 
missioners, 21;  auditors,  22;  contin- 
uance of  board,  22;  need  of  super- 
intendent of  finance,  22 ;  board 
directed  to  lay  before  Congress 
account  of  money  received,  83 ;  to 
draw  bills  on  Franklin,  99 ;  to  de- 
posit bills  of  exchange  in  bank, 
101;  continued  in  office,  111;  co- 
operate with  Morris,  267;  directions 
given  them  by  Congress,  269;  end 
of,  306 ;  creation  of  new  board, 
333  ;  how  board  managed  to  pay 
interest  on  Holland  loans,  352,  353; 
money  paid  by  board  without  au- 
thority of  Congress,  358.  Congress ; 
States;  Morris;  Accounts. 

Breck,  Samuel,  his  opinion  of  Robert 
Morris,  332. 

c. 

Certificates,  given  for  "  specie  or 
other  current  money  equivalent," 
102;  difficulties  growing  out  of  use 
of,  102,  281-283;  for  interest,  288, 
322,  846 ;  allowed  in  payment  of 
requisitions  on  the  States,  322-324; 
given  to  creditors,  327;  use  of,  con- 
demned by  Madison,  348  ;  paid  to 


government  in  lieu  of  money,  350. 

Specie. 

Citizens'  plan  for  raising  money,  78; 
referred  to  Board  of  Treasury,  79. 

Claims,  committee  on,  12 ;  presenta- 
tion of  accounts  to  them,  12 ;  ap- 
pointment of  committee  of  ac- 
counts, 14;  debate  over,  14;  their 
mode  of  adjusting  accounts,  15 ; 
division  of  duty  respecting  ex- 
amination of,  15 ;  commissioners 
appointed  to  examine  particular 
accounts,  15 ;  committee  of  claims 
discharged,  15.  Accounts;  Board 
of  Treasury;  Morris. 

Clarke,  John,  value  of  paper  money 
gone,  and  country  reduced  to  bar- 
ter, 133. 

Clinton,  Gen.,  on  depreciation  and 
counterfeiting,  152,  153 ;  fixes 
prices,  173. 

Coinage,  R.  Morris's  views  on,  301- 
305  ;  criticised  by  Jefferson,  304, 
305;  G  Morris's  views  on  the  sub- 
ject, 305 ;  coinage  law,  340-343. 

Colonies,  financial  condition  of,  7. 

Committee  of  secret  correspondence, 
appointment  of,  222 ;  change  of 
name,  222,  223 ;  appointment  of 
Livingston  as  secretary  of  foreign 
affairs,  223;  Lee  and  Deane  sent 
abroad  to  procure  supplies,  223. 
Foreign  Loans ;  Franklin ;  J. 
Adams  ;  Deane  ;  Lee  ;  Jay. 

Comptroller  authorized  to  perform 
duties  of  financier,  333. 

Confederal  fund,  65. 

Confederation,  articles  of,  formed, 
55  ;  financial  features  of,  112  ; 
weakness  of,  297. 

Confiscation,  Congress  recommends 
confiscation  of  property  of  loyal- 
ists, 56;  recommendation  heeded, 
56;  action  of  the  States,  57;  discus- 
sion of  right  to  confiscate  when 
making  treaty  with  Great  Britain, 
58;  recommendation  of  Congress  in 
fulfilment  of  treaty,  not  heeded,  58; 
recompense  for,  to  loyalists  by 
Great  Britain,  59. 


INDEX. 


363 


Congress,  object  of,  in  the  beginning,  J 
4;  first  enactment,  4;  importation 
of  goods  prohibited,  4;  powers  of, 
6;  ignorance  of  members  of  legis- 
lative proceedings,  9  ;  temporary- 
character  of  measures,  10 ;  borrows 
six  thousand  pounds,  2G;  Phillips's 
opinion  of  motive  in  borrowing 
so  small  a  sum,  26  ;  calls  upon, 
for  money,  45  ;  variety  of  meth- 
ods for  raising  money,  51;  ad- 
journed to  Lancaster,  54 ;  applies 
to  France  for  aid,  60  ;  opposition 
of  Laurens  to  drawing  bills  on 
France,  60 ;  at  first  opposed 
to  it,  62 ;  motion  carried,  62  ; 
lethargy  of,  64,  65  ;  requests 
States  to  raise  their  quotas, 
71;  sends  circular  letter  to  the 
States,  72;  contents  of,  72-74;  con- 
troversy with  Silas  Deane,  74;  com- 
mittee appointed  to  investigate 
and  reduce  expenditures,  79  ;  im- 
provements suggested,  79  ;  issues 
another  address,  83;  outline  of,  83- 
86;  remarks  on,  87;  sends  letter  to 
States,  88  ;  hope  of,  88 ;  weak- 
ness of  authority  of,  90 ;  what 
had  been  done,  90,  91  ;  recom- 
mends new  assessment  of  taxes, 
93  ;  Massachusetts  finds  fault 
with  apportionment,  93  ;  action 
of,  through  1779,  103 ;  progress 
of,  104  ;  address  to  States,  106 ; 
amount  of  specie  asked  for,  106 ; 
remodels  departments  of  govern- 
ment, 109;  various  financial  meas- 
ures passed,  111,  269,  270;  address 
to  the  States,  129 ;  appeals  to  the 
people  to  save  the  value  of  paper 
money,  132;  stops  drawing  bills  of 
exchange,  271;  resolves  to  liqui- 
date public  debt  in  specie,  272 ; 
reply  to  farmers-general  respecting 
payment  of  interest,  320,  321;  mer- 
chants of  New  York  petition,  to 
have  their  losses  paid,  343,  344. 
Stales ;  Board  of  Treasury ;  Morris ; 
Taxation  ;  Estimates  ;  Pickering  ; 
Pledges Repudiation. 


\  Cornell,  Gen.,  description  of  condi- 
tion of  the  country,  101. 
Corruption,  of  government  officials, 
214,  258;  of  public  creditors  and 
people,  215-217.  Arnold;  P.  Web- 
ster. 

Credit,  annihilation  of  credit  of 
United  States  in  Canada,  69;  pub- 
lic credit  lost,  107;  destroyed  by 
use  of  paper  money,  142 ;  low  state 
of,  275,  276;  credit  of  government 
in  Holland,  351,  352. 
Counterfeiting,  Congress  attempts  to 
guard  against,  74,  150;  progress  in, 

150,  153;  British  Government  en- 
gages in,  151;  the  reason  therefor, 

151,  152,  156  ;  capture  of  shipload 
of  counterfeits,  157;  State  issues 
counterfeited,  153;  two  issues  with- 
drawn on  that  account,  153;  effect 
of  withdrawing  them,  154,  155; 
Rutherford's  letter  to  Washington 
on  the  subject,  155,  156;  another 
effect  of  the  measure,  156;  hard 
money  counterfeited,  156;  Morris's 
notes  counterfeited,  157. 

D. 

Deane,  Silas,  plan  for  providing 
funds,  66;  seeks  to  procure  them 
in  France,  223-227;  as  one  of  three 
commissioners,  227-231;  effect  of 
his  negotiations  upon  credit  of  his 
country,  232,  233;  examination  of 
his  accounts,  232. 
Debt,  British  statement  of,  in  1778, 
59;  errors  in  statement,  60;  debt  in 
1779,  83  ;  report  of  committee  in 
1781,  272  ;  of  Morris  in  1782,  309  ; 
public  debt  in  1783,  317;  funding  of, 
317,  318  ;  amount  of,  in  October, 
1783,  320.  Estimates  ;  Jefferson. 
Delegates,  how  chosen,  4  ;  their  au- 
thority, 5.  Georgia. 
Depreciation  of  paper  money,  44, 190; 
too  patent  to  be  ignored,  45;  extent 
of  depreciation  and  presentation  of 
memorial  to  Congress  on  the  sub- 


364 


INDEX. 


ject,  75 ;  referred  to  Treasury  Board, 
76  ;  depreciated  by  efforts  of  mo- 
nopolizers, 77;  enemy's  hope  rested 
on  depreciation  of  paper  money, 
78  ;  patriotism  displayed  by  a  Ger- 
man on  the  subject,  97 ;  depreciation 
when  British  troops  entered  J ersey, 
118;  people  alarmed,  119;  order  of 
Gen.  Putnam,  119;  enforcement  of 
order,  119  ;  Morris's  description 
of  depreciation,  119-121;  measures 
taken  to  punish  persons  declin- 
ing to  receive  bills,  121,  122;  by 
whom  refused,  122;  depreciation  at 
Lancaster,  123;  depreciation  slower 
in  the  South,  124;  sufferings  of  the 
Quakers,  124;  beginning  of  depre- 
ciation in  various  States,  124;  G. 
Morris's  address  to  Quakers  on  the 
subject,  125,  126;  depreciation  in 
Massachusetts  described  by  J. 
Adams,  126,  127;  his  views  on  the 
subject,  127,  128;  a  newspaper  cure 
for  depreciation,  130;  belief  of  peo- 
ple in  redemption  of  the  bills,  130, 
131 ;  Jay's  views  concerning  depre- 
ciation, 131;  afforded  facilities  for 
speculation,  131;  how  depreciation 
was  regarded  by  Washington,  131, 
132;  appeal  of  committee  of  citizens 
of  Philadelphia  to  support  the  value 
of  paper  money,  132  ;  country  re- 
duced to  barter,  133;  instruction  of 
Washington  to  his  agent  in  refer- 
ence to  collection  of  debts,  133, 134; 
British  report  of  depreciation,  134; 
everywhere  acknowledged  except 
by  Congress,  135  ;  end  of  paper 
money,  135;  effect  of  Forty-for-one 
Act,  135;  Witherspoon's  speech 
against,  135  ;  depreciation  estab- 
lished by  Congress  did  not  repre- 
sent whole  amount,  137;  old  emis- 
sions refused  by  the  army,  142  ; 
depreciation  in  Massachusetts,  142, 
143;  by  whom  the  final  blow  was 
given,  143 ;  how  afterward  re- 
garded, 143;  views  of  a  newspaper 
writer  on  depreciation,  160;  how 
affected  by  act  limiting  prices,  165, 


166  ;  Congress  establishes  a  scale 
of,  187,  305.  Paper  mor^ey. 
Dollar,  explanation  of  dollar-mark, 
31;  established  as  a  money  unit, 
340,  341;  difference  in  value  be- 
tween American  and  Spanish  dol- 
lar, 342. 

E. 

Embargo  laid  on  importation  of  pro- 
visions, 64. 

Estimates  of  money  needed  in  1775, 
10;  for  1783,  314;  for  1784,  321;  for 
1785,  347,  349;  for  1786,  351;  for  1787, 
352.    Taxation;  Specie. 

Extravagance  caused  by  paper  mon- 
ey, 212,  213. 

F. 

Finances,  condition  of,  in  1778,  64;  in 
1779,  82;  in  Europe  in  1780, 137, 138; 
at  beginning  of  Morris's  adminis- 
tration, 275,  276;  critical  condition 
of  treasury  in  1782,  310,  315;  in  1784, 
258,  324;  report  on  condition  of 
treasury  in  1788,  357,  358.  Cornell  ; 
Hamilton;  Jefferson;  Union. 

Financial  history,  importance  of,  3. 

Foreign  loans,  appointment  of  com- 
missioners to  procure,  227;  leading 
men  in  French  cabinet,  222;  suc- 
cess of  commissioners,  227-231,  233, 
247;  they  separate,  247;  reason  why 
foreign  nations  were  willing  to 
grant  assistance,  246,  247  ;  Dutch 
bankers  want  interest  paid  on  obli- 
gations in  Europe,  354.  Beawnar- 
chais;  Franklin;  Jay;  J.  Adams; 
Lee;  Deane;  Laurens. 

Forty-for-one  Act.  Papier  Money ; 
France. 

France,  application  to,  for  aid,  60; 
bills  drawn  on,  62;  how  avails 
were  applied,  62;  agreement  with 
France  concerning  payment  of 
interest  on  loans,  (V.\,  64  ;  opposition 
of  France  to  Forty-for-one  Act,  l.">.r>; 
correspondence  between  Vergennes 


INDEX. 


365 


and  Adams  on  the  subject,  135, 136; 
what  French  holders  of  paper 
money  did  with  it,  144;  France 
wants  payment  of  interest  due  to 
her,  351,  352.  Laurens;  Foreign 
Loans. 

Franklin,  appointed  commissioner  to 
negotiate  loans  abroad,  227;  his 
efforts  as  one  of  three  commis- 
sioners, 227-231;  they  separate,  247; 
bills  drawn  on,  233,  234;  three  mil- 
lion loan  filled,  234;  continues  his 
efforts,  234,  235;  effect  of  attempts 
of  States  to  borrow  money,  236  ; 
Neufville's  proposition,  236-238  ; 
tries  to  raise  money  in  Holland, 
2.S5,  238;  Bingham  draws  on  him, 
233 ;  his  complaints  concerning 
Franklin's  conduct,  239 ;  France 
grants  new  loans,  240 ;  Franklin 
requested  to  apply  for  another, 
240 ;  his  efforts,  241  ;  correspond- 
ence with  Jackson,  242;  urged  to 
get  another  loan,  243 ;  settlement 
with  France,  244  ;  another  loan 
granted,  245 ;  letter  to  Morris 
about  further  assistance,  245,  246. 
Paper  Money ;  Foreign  Loans ; 
Morris. 

Fraud.  Corruption. 

G. 

Georgia,  sends  delegates  to  Congress, 
4;  assistance  furnished  by,  53. 

Gerry,  E.,  finds  fault  with  action  of 
Congress  in  assessing  Massachu- 
setts, 93,  94;  how  paper  money  was 
received,  97;  end  of  its  circulation, 
142. 

Gibson,  John,  elected  auditor,  20. 

Greene,  Gen.,  opinion  concerning 
legal  tender  laws  and  Forty-for-one 
Act,  136;  low  state  of  public  credit, 
107;  frauds  in  the  army,  211.  Mor- 
ris. 

H. 

Hamilton,  A.,  need  of  a  superintend- 
ent of  finance,  22,  23;  first  letter 


to  Morris,  92 ;  remarks  on,  93 ; 
views  concerning  specific  supplies, 
91;  financial  condition  of  the  coun- 
try, 99;  success  of  Morris's  admin- 
istration, 286. 

Hancock,  J.,  extravagance  of,  212. 

Hillegas,  M.,  elected  treasurer,  20; 
directed  to  borrow  money,  51. 

I. 

Indents.  Certificates. 

Interest.     Loan;    Foreign  Loans; 

Certificates;  Loan-Office  Certificates; 

Paper  Money. 

J. 

Jay,  John,  financial  negotiations 
with  Spain,  249,  250. 

Jefferson,  Thomas,  views  on  coinage, 
304,  305;  mode  of  getting  assistance 
for  the  government,  325,  326  ;  de- 
scription of  condition  of  Ameri- 
can finances  in  Holland  and 
France,  351,  352 ;  borrows  from 
Virginia,  for  benefit  of  United 
States,  352;  transfer  of  debt  from 
France  to  Holland,  353;  sale  of 
public  lands,  356,  357. 

L. 

Ladies,  contribution  by,  to  soldiers, 
100. 

Lands,  public,  sale  of,  346,  347,  356. 

Lang,  James,  depreciation  at  Lancas- 
ter, Penn.,  123. 

Laurens,  special  minister  to  Ver- 
sailles, 240;  reason  for  appointing 
him,  240;  result  of  his  efforts,  240, 
242,  243 ;  his  opinion  concerning 
prevalence  of  fraud,  215.  Congress. 

Lee,  Arthur,  appointed  foreign  com- 
missioner, 227;  goes  to  Spain,  247; 
no  hope  of  getting  a  loan  there, 
239  ;  loan  promised,  247-249  ;  opin- 
ion about  getting  a  loan  in  Hol- 
land, 250.    Foreign  Loans. 

Legal  tender  laws,  States  recom- 


366 


INDEX. 


mended  to  revise  them,  98;  Rhode 
Island  first  State  to  heed  recom- 
mendation of  Congress  making 
paper  money  a  legal  tender,  174; 
the  act  passed  by  Rhode  Island, 
174;  by  Virginia  and  other  States, 
174,  175;  act  of  Congress,  175;  fur- 
ther recommendations  of  Congress 
on  the  subject,  176;  consequences 
of  complying  with  the  recommen- 
dation just  mentioned,  176-178;  let- 
ter in  "Pennsylvania  Packet"  on 
the  subject,  178,  179;  consequences 
as  described  by  another  newspaper 
writer,  179,  180;  debtors  benefited, 
180,  187;  injustice  of  the  measures, 
180,  181;  Congress  urges  States  to 
amend  it,  181;  description  of  new 
difficulties,  181;  action  of  Rhode 
Island  in  repealing  the  act  and  in 
respect  to  claims  of  creditors,  181- 
184;  example  of  Rhode  Island  fol- 
lowed by  other  States,  184;  enact- 
ment of  stay  laws,  184;  action  of 
Virginia,  184;  Maryland,  185;  Penn- 
sylvania, 185;  South  Carolina,  186; 
action  of  States  in  regard  to  fines, 
186,  187;  how  Congress  dealt  with 
public  creditors,  187;  States  sought 
to  do  justice  to  all  parties,  188; 
benefit  of  legal  tender  laws,  188; 
Paine's  opinion  thereon,  188;  pro- 
vision in  Constitution  of  United 
States  relating  thereto,  188  ;  how 
regarded  by  United-States  Su- 
preme Court,  188, 189.  Paine. 

Livingston,  opinion  concerning  taxa- 
tion, 198,  199  ;  appointed  secretary 
of  foreign  affairs,  223.  Foreign 
Loans ;  Morris. 

Loan  proposed,  45;  dispute  about 
rate  of  interest,  45;  rate  fixed,  45; 
sum  to  be  borrowed,  45;  form  of 
certificate,  46;  details  concerning, 
46;  amount  of  commission  paid  for 
procuring  loans,  46;  failure  of 
scheme,  4(5:  opinion  of  John  Adams 
thereon,  47;  rate  raised,  48;  more 
money  borrowed  from  loan-offices, 
50 ;  success  of  previous  loan,  50  ; 


loan-office  system  extended.  56  ; 
new  loan  for  ten  millions,  5!);  terms 
of,  59;  payment  of  interest  on,  63, 
see  note,  64,  228,  229,  233,  239;  new 
loan  for  twenty  millions,  74,  80; 
terms  of,  80-82;  regulation  of  in- 
terest on  loans,  82;  table  of  inter- 
est reported,  82  ;  inducements  to 
make  loans,  88 ;  another  loan  of- 
fered, 103;  adjustment  of  interest, 
103,  104;  how  holders  of  loan-office 
certificates  were  to  be  paid,  136; 
Morris  opposed  to  issuing  them, 
288:  opposition  to  loans,  312;  pay- 
ment of  interest  on  Holland  loans, 
352,  355,  356.  Foreign  Loans;  Cer- 
tificates; Loan-Office  Certificates; 
Morris;  Board  of  Treasury. 

Loan-office  certificates,  plan  of,  in- 
vented by  Virginia,  259 ;  plan  de- 
scribed, 259,  260;  effect  of  issuing 
them,  260-264;  Morris  opposed  to 
issuing  any  more,  288;  plan  for 
paying  them,  289 ;  tlieir  specie 
value  ascertained,  340  ;  their  value 
in  1784,  354.  Loan. 

Lottery  scheme,  48;  history  of,  48; 
plan  reported  by  Board  of  Treas- 
ury, 49;  payment  of  certificates  to 
"  fortunate  adventurers,"  105;  form 
of  note  given,  105;  how  signed,  106; 
rate  of  interest,  106;  confusion  of 
accounts,  and  end  of  scheme,  106. 

M. 

Madison,  condemns  practice  of  giving 
certificates  for  interest,  348;  causes 
which  affected  the  value  of  paper 
money,  147;  powers  of  the  confed- 
eration, 7. 

Marion,  Gen.,  enforcement  of  act  reg- 
ulating prices,  168. 

Money.   Paper  money. 

Monopolizers  depreciated  the  curren- 
cy, 77. 

Morris,  G.,  report  on  paper  money, 
25,  26  ;  views  on  coinage,  305. 

Morris,  R.,  opinion  of  first  treasury 
board,  16 ;  duty  of  superintendent 


INDEX. 


367 


of  finance,  109;  election  of  Morris, 
110;  wisdom  of  the  step,  110;  letter 
to  Congress  describing  his  commer- 
cial relations,  112;  remarks  there- 
on, 113;  wanted  power  to  appoint 
and  remove  officers  in  his  depart- 
ment, 113;  action  of  Congress  upon 
Morris's  request,  114;  second  letter 
of  Morris  to  Congress,  114,  115;  his 
request  granted,  116;  description  of 
depreciation  of  paper  money,  119- 
121 ;  co-operation  of  Morris  with 
Board  of  Treasury,  267 ;  how  his  ap- 
pointment was  received  by  the  pub- 
lic, 267-269;  fitness  for  place,  267; 
Hamilton's  opinion,  268  ;  estab- 
lishes Bank  of  North  America,  273; 
its  success,  273-275  ;  condition  of 
public  credit,  275,  276;  Morris's  ex- 
pectations of  relief,  276  ;  from  for- 
eign countries,  277  ;  dependence 
upon  home,  276  ;  taxes,  278,  281  ; 
from  paper  money  paid  for  taxes, 
278,  279;  small  sums  paid  by  the 
States,  279,  280;  specific  supplies, 
281-285 ;  use  of  certificates  con- 
demned, 282;  his  treatment  of  Gen. 
Greene,  283,  284  ;  employment  of 
his  own  credit,  285,  286;  change  of 
American  account  in  Paris,  286, 
287;  opposed  to  issuing  loan-office 
certificates,  288  ;  plan  for  paying 
them,  289;  his  efforts  to  settle  ac- 
counts of  States  with  the  General 
Government,  290-292,  305,  306,  312; 
taxation  of  imports,  292-297;  weak- 
ness of  Articles  of  Confederation, 
297;  reduces  expenses  of  the  gov- 
ernment, 297-299,  312,  315,  316  ; 
charges  against  Lira,  and  his  reply, 
299,301;  coinage,  301-305;  new  bur- 
dens, 305  ;  end  of  Board  of  Treas- 
ury, 306;  officers  in  place  of  board, 
307  ;  reasons  why  Morris  expect- 
ed but  little  assistance  from  the 
States,  307,  308;  requested  to  furnish 
a  statement  of  public  indebtedness, 
309;  letter  to  States  upon  condition 
of  finances,  310;  estimates  for  1783, 
314  ;    overdraws  his   account  in 


France,  317 ;  estimates  for  1784> 
321,  322;  description  of  the  way  he 
expects  to  meet  his  bills,  324,  325; 
end  of  his  financial  career  ap- 
proaching, 328;  faith  of  Congress  in 
his  ability  and  integrity,  328,  329 ; 
his  own  notes  all  redeemed,  329 ; 
breadth  and  soundness  of  his  views, 
330  332;  never  diverted  the  public 
funds  from  their  original  uses,  331. 
Congress;  Foreign  Loans;  Taxa- 
tion. 

N. 

Neckar.   Foreign  Loans;  France. 
P. 

Paine,  Thomas,  views  on  legal  tender 
laws,  188;  depreciation,  67,202-205. 

Paper  money,  issuing  of  it  referred 
by  Congress  to  colonial  assemblies, 
24;  letter  of  New-York  Assembly  to 
delegates,  24  ;  reply  of  delegates, 
25  ;  report  of  committee  of  New- 
York  Assembly,  25;  opposition  to 
issue  of  paper  money,  27;  kinds  of 
paper  money  issued,  27,  28;  Pow- 
nall's  opinion  of,  28  ;  Franklin's 
opposition  to,  28;  result  of  issuing 
paper  money  in  the  Colonies,  29; 
Ramsay's  opinion,  29  ;  views  of 
John  Adams,  29,  30;  observations 
of  English  commissioners  on,  30; 
first  issue  of  two  millions,  31 ;  New- 
York  Assembly  plan  followed,  32; 
names  of  committee  appointed  to 
engrave  the  plates,  32;  form  of  bills, 
33  ;  errors  committed  in  issuing 
notes,  33;  a  large  increase  not  ex- 
pected, 33;  taxation  of  Colonies  for 
their  redemption,  34  ;  opinion  of 
Bronson,  34;  Colonies  would  have 
refused  to  pay  direct  tax,  35;  opin- 
ion of  Lieut.-Gov.  Colden,  35;  im- 
practicability of  getting  loans,  36  ; 
Franklin  urged  Congress  to  resort 
to  them,  36;  Congress  issued  bills 
in  obedience  to  public  sentiment, 
36-38  ;  delay  in  printing  bills,  39 ; 


368 


INDEX. 


another  million  issued,  39  ;  com- 
mittee appointed  to  sign  the  bills, 
39;  assessment  upon  Colonies  for 
sinking  bills,  39  ;  amount  of,  40; 
quota,  how  paid,  40;  Colonies  were 
to  levy  and  collect  taxes,  40;  how 
bills  redeemed  were  to  be  disfig- 
ured, 40;  response  of  Colonies  to 
recommendation  of  Congress  to  lay- 
taxes,  40;  erroneous  principle  upon 
which  assessment  was  based,  41; 
confident  belief  in  redemption  of 
first  issue,  42  ;  neglect  of  signers 
of  bills,  42  ;  came  into  circulation 
slowly,  42  ;  signers  requested  to 
complete  their  work,  43 ;  another 
million  authorized,  43  ;  three  mil- 
lions more,  43;  opposition  of  Frank- 
lin to  the  measure,  43  ;  Colonies 
directed  to  provide  ways  for  sink- 
ing bills,  43;  when  quotas  should 
be  paid,  43;  ragged  bills  exchanged 
for  fresh  ones,  44 ;  fourth  issue 
ordered,  44  ;  issue  of  fractional 
bills,  44;  beginning  of  depreciation, 
44;  lesson  it  ought  to  have  taught, 
45;  new  issue  ordered,  49;  never 
made,  50;  emission  of  five  millions 
ordered,  52  ;  form  and  description 
of  bills,  52,  53  ;  another  issue,  53, 
54;  amount  of  paper  money  at  time 
of  French  alliance,  59;  reason  why 
no  more  would  be  necessary,  63; 
views  of  Thomas  Paine  on  paper 
money,  67 ;  prosecution  of  war  with, 
69;  issues  during  1778,  70  ;  use  of 
State  issues  restricted,  71;  persons 
hired  to  sign  bills,  74;  their  com- 
pensation, 74 ;  amount  issued  in 
1779,  74;  effect  of  enormous  emis- 
sions, 74;  Congress  defends  issue 
of,  76  ;  forty-five  millions  to  be 
issued,  77;  delegates  from  Rhode 
Island  opposed  to  the  measure,  77 ; 
President  Reed's  view  of  the  con- 
dition of  paper  money,  78;  quantity 
issued  in  1779  between  May  and 
September,  82;  limitation  of  quan- 
tity, H'.'>  :  end  of  issuing?  paper 
money,  88;  amount  of  final  issue, 


88;  consequences  of  issuing  it  seen 
by  Congress,  90;  redemption  of,  94; 
new  issues,  94  ;  Forty-for-one  Act, 
94;  form  of  new  emission,  95;  mode 
of  issuing  them,  95  ;  Ellsworth's 
opinion  of  the  measure,  95,  96  ; 
measure  criticised,  96;  how  measure 
was  received  by  the  people,  96;  by 
merchants  at  Hartford,  96;  effect 
of  measure  described  by  Gerry,  97; 
by  Gen.  Armstrong,  98  ;  value  of 
paper  money  in  1776, 118, 190;  testi- 
mony of  Ramsay,  118 ;  new  plan  for 
enhancing  value  of,  128;  end  of  pa- 
per money,  135 ;  how  new  emissions 
were  received,  138  ;  did  not  bear 
interest,  271 ;  view  of  Charles  Pet- 
tit,  139;  effect  of  action  of  General 
Assembly  of  Massachusetts,  140 ; 
Sullivan's  criticism  of  the  measure, 
140;  rate  of  decline  in  their  value, 
141  ;  circulation  of  old  and  new 
emissions,  141,  142  ;  late  period  at 
which  paper  money  was  exchanged, 
144 ;  how  the  people  supplied  them- 
selves with  money  after  paper  is- 
sues ceased  to  circulate,  144,  145; 
peaceful  exit  of  paper  money,  146; 
rejoicing  over,  208;  State  issues  in 
conflict  with  Continental  issues, 
147  ;  issue  of  tokens,  certificates, 
&c,  148  ;  efforts  of  Congress  to 
stop  State  issues  of  paper  money, 
148,  149 ;  paper  money  not  a  lien 
upon  property,  209  ;  retirement 
of  old  emissions,  287;  government 
declines  to  receive  paper  money, 
344;  new  mania  for  paper  money 
in  1786,  349,  360.  Depreciation  of 
Paper  Money. 

Pettit,  Charles,  poverty  of  the  treas- 
ury, 98  ;  slow  circulation  of  the 
new  emissions,  139,  140. 

Pickering,  Timothy,  letter  to  Con- 
gress respecting  pay  of  officers  "  in 
specie  or  other  money  equivalent," 
107  ;  required  to  clip  gold  coins, 
298;  his  opinion  thereon,  298. 

Plans  to  restore  the  value  of  paper 
money.   Paper  Money. 


INDEX. 


369 


Pledges  of  Congress  to  redeem  paper 
money,  206,  207  ;  address  of  Con- 
gress on  the  subject,  207,  208;  pub- 
lic faith  in  the  fulfilment  of  them, 
208;  arguments  used  by  Congress, 
208,  209. 

Pownall  on  paper  money,  28. 

Prices,  measures  taken  to  prevent 
a  rise  of,  158;  fixing  them  by  law, 
158,  159  ;  Adams's  views,  165  ;  in- 
crease of  prices  condemned,  159 ; 
reasons  why  they  rose,  159  ;  views 
of  newspaper  writer,  160 ;  of  P. 
Webster,  160  ;  of  Congress,  160  ; 
real  causes  overlooked  by  Con- 
gress, 160;  faith  in  measure  limit- 
ing prices,  160, 161;  secreting  goods, 
162  ;  opposition  to  measure,  162  ; 
enforcement  of  the  law  in  Phila- 
delphia, 162,  163,  165  ;  in  Boston, 
163,  164:  action  of  merchants  there 
and  in  vicinity,  164;  in  Albany,  164; 
effect  of  the  measure  on  prices,  166; 
recommendation  of  Congress  on 
the  subject,  167;  not  heeded  by  the 
States,  167 ;  States  requested  to 
transmit  list  of  prices  to  the  Treas- 
ury Board,  167;  action  of  convention 
of  New-England  States  and  New 
York  in  fixing  prices,  167 ;  approved 
by  Congress,  167;  recommendation 
of,  167,  168  ;  Marion's  idea  of  the 
act,  168  ;  failure  of  Congress  to 
recognize  the  real  difficulty,  168, 
169  ;  petition  of  merchants  for  re- 
peal of  the  act,  169;  claims  of  me- 
morialists, and  reply  thereto,  169- 
173  ;  British  commanders  fixed 
prices,  173. 

Q. 

Quakers.   Paper  Money. 
Quincy,  Josiah,  how  paper  money 
was  received  by  the  people,  139. 

R. 

Ramsay,  erroneous  view  respecting 
paper  money,  29  ;  effect  of  legal 


tender  laws,  176-178;  when  depre- 
ciation began,  124 ;  how  paper 
money  was  received,  118;  benefit 
derived  from  it,  190. 

Raynal,  Abbe,  views  on  American 
finance,  202. 

Reed,  Joseph,  what  the  people  did 
for  money  after  paper  issues  ceased 
to  circulate,  144,  145  ;  opinion  on 
legal  tender  laws,  186 ;  how  army 
affairs  were  managed,  211.  Paper 
Money. 

Repudiation,  94,  106-109,  217-220. 

Rutherford,  Robert,  letter  to  Wash- 
ington upon  effect  of  withdrawing 
certain  issues  of  paper  money,  155. 

s. 

Seizure  of  goods,  commissioners 
authorized  to  seize  them,  67,  89; 
committee  to  take,  upon  advice  of 
commander-in-chief,  99  ;  certifi- 
cates given  for  them,  99;  Washing- 
ton authorized  to  seize  them,  121. 

Sheffield,  Lord,  on  the  circulation  of 
specie  sent  to  America,  326. 

Specie,  some  services  rendered  only 
for,  68;  proposed  as  a  bounty,  68; 
employed  in  expedition  against 
Canada,  68;  amount  of,  expended 
in  1778,  68,  69;  plentifulness  of, 
104,  326,  327;  payment  of  debts  in 
specie  required,  270;  estimates  re- 
quired to  be  paid  in,  272 ;  specie 
demanded  for  bank-bills,  275;  clip- 
ping of  coin  required  by  Morris, 
298;  reduction  of  indebtedness  to 
specie  valuation,  305;  States  asked 
to  levy  taxes  in  specie,  103,  106; 
Morris  pays  soldiers  in  specie,  316. 

Specific  supplies,  States  requested  to 
furnish,  89,  91,  270;  plan  resumed, 
93;  fruitless  efforts  of  States  to 
forward,  100 ;  more  supplies  re- 
quested, 103  ;  Morris  opposed  to 
the  system,  281-285;  so  is  Wash- 
ington, 281;  Dr.  Stiles  favors  it, 
281.  Hamilton. 


370 


INDEX. 


Speculation  in  paper  money,  117, 
118;  officers  speculated  in  specie, 
118;  efforts  of  Council  of  Pennsyl- 
vania to  suppress  the  practice,  118; 
paper  money  speculations,  142; 
fluctuations  in  paper  money  gave 
rise  to  speculators,  187,  210;  spec- 
ulation by  goverment  officials,  210, 
211;  by  other  persons,  212,  219. 

States,  retention  of  power,  and  re- 
fusal to  exercise  it,  45 ;  money 
needed  by  the  States,  45;  request- 
ed to  raise  money,  and  remit  to  the 
treasury,  50;  amount  to  be  placed 
to  credit  of  the  States,  50  ;  weak- 
ness of  measure,  51;  States  trusted 
too  much  in  General  Government, 
53 ;  accounts  of,  with  Congress, 
mixed,  53;  remittance  to  Georgia, 
53;  appeal  to  States  for  five  mil- 
lions, 55  ;  how  apportioned,  55  ; 
estimates  only  approximate,  56 ; 
recommended  to  stop  issuing  bills, 
56;  wisdom  of  recommendation,  56; 
called  upon  for  fifteen  millions,  88; 
charged  with  interest  upon  defi- 
ciencies, 88;  Congress  sends  letter 
to,  88;  States  requested  to  furnish 
supplies  of  coin,  89 ;  asked  to  pay 
ten  millions,  and  to  furnish  sup- 
plies, 98;  which  are  to  be  credited 
to  States,  98 ;  agents  of,  asked  to 
transmit  monthly  returns  of  pro- 
visions, 102;  their  remissions,  102; 
recommended  to  levy  a  tax  of  six 
million  silver  dollars,  103 ;  yield 
some  of  their  powers  to  the  Gen- 
eral Government,  112;  requested  to 
transmit  list  of  prices  to  Treasury 
Board,  167;  directed  to  make  re- 
turns to  Board  of  War,  270;  States 
drawn  on  for  money,  272  ;  their 
languor  and  inexertion,  297,  310; 
States  asked  for  eight  millions, 
307,  308;  opposition  to  the  assess- 
ment, 308,  complaint  of  New 
Hampshire,  308  ;  answer  of  Con- 
gress, 308,  309  ;  more  money  re- 
quested of  States,  313;  Congress 
attempts  to  make  States  pay  debts 


of  General  Government,  313,  314. 
Congress ;  Franklin  ;  Taxation. 
Sullivan,  Gen.,  criticism  of  new 
scheme  of  paper  emissions,  140; 
on  depreciation,  143;  profit  on  the 
purchase  of  French  bills,  327. 


T. 

Taxation,  assessment  of  Colonies,  34, 
35,  39,  40,  55,  56,  71,  72,  77,  78,  90, 
91,  98,  103,  106, 190, 191,  270, 307,  308, 
313,  314,  321,  322;  need  of  taxation, 
191,196;  a  delegate  opposes  loading 
his  constituents  with  taxes,  38;  tax- 
ation the  remedy  for  depreciation, 
191,  192  ;  States  requested  to  raise 
money  by  taxation,  43, 193;  Articles 
of  Confederation  relating  to,  193, 
194;  feeble  response  of  States  to 
request  of  Congress,  53,  194,  195, 
197;  address  of  Congress  to  the 
States,  195, 196;  heavy  taxes  finally 
laid,  197;  people  complain  of  them, 
197,  198,  310-312;  shrewd  observa- 
tions of  Ellery  and  Collins,  197  ; 
depreciation  operated  as  a  tax, 
198;  especially  upon  creditors,  198; 
amount  of  tax  thus  paid,  198,  199; 
advantage  and  disadvantage  of 
depreciation,  199-205;  taxation  of 
imports,  292-297,  318,  319;  States 
requested  to  lay  taxes  separately 
for  the  General  Government,  315  ; 
remissness  in  paying,  324,  346,  347 ; 
final  attempt  to  raise  a  revenue 
from  imports,  346.  Morris ;  Specie ; 
Estimates. 

Treasury  department,  organization 
of,  9;  appointment  of  first  financial 
committee,  10;  standing  commit- 
tee, 10;  powers  of,  11;  enlargement 
of  powers,  11;  treasury  office  of 
accounts  established,  12;  auditor- 
general  authorized,  12;  names  by 
which  standing  committee  were 
known,  13;  first  auditing  board, 
13;  history  of,  13;  investigation  of, 
271.   Board  of  Treasury. 


INDEX.  371 


Trumbull,  Jonathan,  jun.,  elected 
comptroller,  20. 

Turgot,  how  France  should  regard 
the  contest  between  Great  Britain 
and  America,  61.   Foreign  Loans. 


u. 

Union,  desperate  condition  of,  54  ; 
grows  worse,  64;  statement  of  Wil- 
liam Hosmer,  64;  picture  drawn 
by  a  Frenchman,  75;  condition  of, 
in  1780,  137, 138.  Finances. 

V. 

Vergennes.  Foreign  Loans ;  France ; 
John  Adams ;  Paper  Money. 


w. 

Washington,  Gen.,  on  repudiation, 
217 ;  mode  of  enlistments,  80 ; 
authorized  to  seize  goods,  121 ; 
pleased  with  appointment  of  Mor- 
ris, 269. 

Webster,  Noah,  necessity  of  issuing 
bills  of  credit,  35;  limitation  acts 
condemned,  158;  how  paper  money 
increased  speculation,  187,  210,  219. 

Webster,  Pelatiah,  disgust  of  people 
with  paper  money  schemes,  141  ; 
views  on  limitation  of  prices,  160; 
legal-tender  laws,  187  ;  taxation, 
191,  192;  depreciation,  199,  200;  be- 
lief in  redemption  of  paper  money, 
208,  209  ;  extent  of  public  corrup- 
tion, 216. 

Witherspoon,  speech  against  Forty- 
f  or-one  Act,  135. 


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